It says in Step Number 2 of the 13 Steps to Investing Foolishly, "Settle your personal finances first." In other words, end your credit card debt.

By most accounts, the U.S. economy is growing due to consumer spending and confidence. Unfortunately, other statistics show that larger-than-ever portions of that spending are being put on credit cards. We're fueling the economy all right, but we're digging our own holes deeper to do it.

I am not going to advocate cutting up all your cards. I have six of those little plastic bits bulging up my wallet -- one charge card, 3 credit cards, and two store cards. But I have a system that helps me stick to a budget and is even helping make the "balance due" on the various bills shrink, slowly but steadily.

My system does require that you know your budget. It doesn't have to be complicated; you just need to have an idea basically what you spend in certain areas each month.

This is how my system looks:

The largest and least predictable purchases I make are the "houseware necessities." Car repairs and furnishings fall under this category, so the card devoted to it is the one with the lowest interest rate and most generous terms. This is stuff I don't want to have to worry about when it needs to be bought, it's non-negotiable. And it stays under control because that card is only used for that purpose.

I have one card devoted to "gifts." When birthdays and holidays are coming, I'm usually surrounded by mail-order catalogs, and out comes the "gift card." Gift totals are usually small enough to pay off when the bill comes, but since gift-giving occasions come in fits and spurts, it won't crush me if it takes two or three months to pay these bills. The two specialty-retailer store cards are extensions of the "gift card."

The third card is for entertainment, or "self-gifts." This is how I pay for books, trips, theater tickets... those special little things that we all need to treat ourselves with occasionly. I'm fairly practical and rarely let this bill get out of hand, but just in case I might be tempted, the entertainment charges go on a card with a higher interest rate.

The one charge card is my own special form of punishment. I happen to have a weakness for clothes. My closet is unnecessarily full, but I keep myself in check this way: All clothes I buy go on the charge card, which has to be paid off in full each month. If I really need a new winter coat, it's no problem to buy it, but charging it will prevent me from also picking up that adorable little sweater when I have two similar ones back home.

To make sure I come in under budget, I have a multi-part file folder with six slots, one for each card. Receipts go in the appropriate slot of the folder when I come home with my loot. Anytime I want, I can total the month's receipts for a particular card and figure out if I need to cut back, or if I can afford that CD set for my cousin.

And what about the part where I said I was also reducing my debt? It's very simple -- I don't even use a calculator. When a bill comes in that I can't pay in full, what I do is pay the amount of the new charges, plus a little more. Say I had to buy a $42 part for my car last month, and I'm still trying to pay off a pair of bookcases on that same "housewares card." I can't send a check for the full $342 balance, but what I will do is take the money for the car part -- $42 -- and round it up, sending an almost-painless $50 to the creditor. As long as I only buy what I can afford in one month, and make a little dent in the remainder due, I am getting ahead.

I haven't dared calculate how long it will take before I am debtless and ready to pay myself instead of the card companies, but as long as I'm following this little system, I know it will happen.

If you have some Foolish advice to pass along, send us your Family Fribble and see it right here in The Family Fool.

What's a Fribble? and how you can write one!

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.