Cathy W. is 36, single, and facing a similar dilemma. "I'm a freelancer in computer graphics based out of San Francisco. I think I make decent money, but there's never any left over. I don't see how I could ever afford my own home - certainly not in this town. I have no investments, never mind retirement plans. How am I supposed to do it? That's what I'd like to know."

Michelle, Cathy, and others like them do have alternatives that could increase their income. They could hone their negotiation skills and ask for a raise or increase their freelance rates. If that fails, they could look for a better-paying job, or get a second one until they lessen the weight of their debt. But if they don't fundamentally change how they handle money, earning more now could even worsen their situation in the long run. If extra income isn't properly allocated, it often triggers a hike in living standards. People treat themselves to those designer shoes they've always wanted, get a better car, replace the raggedy couch. It doesn't take long before they're staring down an even higher stack of bills and wondering why they're still broke.

Take control of spending
The latest government figures show that consumers' outstanding revolving credit rose to $744.2 billion, an increase of $17.4 billion from the previous year, while the personal savings rate dropped to a low of 1.5% of disposable income, a considerable change from a high of about 11% in the 1980s.

With so many Americans living beyond their means, what can people do to rein in spending? Bill Ellis, a commodities broker in Portland, Oregon, makes it sound simple. "I'm no financial wizard, but there are tried and tested rules of handling money that make for obvious savings even in the short term," he said. "People in financial services tend to assume the rest of the world is clued in to this stuff. But a lot of people would rather get a root canal than sit down and figure out a plan."

Is that all it takes, then - a plan? According to the self help books, of which there are shelves upon shelves in any bookstore, the first step to better personal finances is to know where your money is going. "Actually, we used to joke that the first step to creating wealth seemed to be writing a 'how-to' book on the subject," said Ellis. "When we're talking about someone with major credit card debt, though, we'd better hope they borrowed the self-help book from the library."

How hard can it be?
"The reality is that the people who most need to make drastic changes only do it in baby steps, if at all," said Ellis. "In fact, straightening out your money is not difficult to do." Easy for him, maybe, but what about those of us who haven't used a calculator since high school?

Assess the damage
To determine the extent to which you live within your means, said Keith Fortier, a compensation consultant at Salary.com, start by keeping track of what you spend for one month. "Carry a notebook to jot down each item and its cost to get a quick sense of what falls through the cracks," he said. "How much of your hard-negotiated take-home pay went to genuine essentials? How much of it went to items you could have done without?"

Financial analysts agree that learning the difference between what you need and what you want is crucial to getting out of debt and into wealth creation. People need food, clothing, and shelter; they want personal trainers, designer moisturizers, unlimited bandwidth, and tickets to the Superbowl. In truth, most Americans don't need a fraction of the stuff we spend our money on. It's the bare necessities that form the bedrock of any budget.