Dear Carrie, I'm in my late-30s and trying to dig out from a mountain of debt (school loans, car loan, credit cards). What makes it so hard is that I have two young kids, and my money can only go so far. What should I pay off first? —A Reader

Dear Reader, For many young families, debt is a fact of life. But that doesn't mean it has to control your life. Of course, with young kids, you have a lot of essential financial obligations. And it's quite natural to also want to provide a few extras so the kids can enjoy sports, special trips, birthday parties — all the things that make childhood special.

Realistically, you may not be able to cover everything. But you can make it a lot easier on yourself and on your kids by not only prioritizing your debt payments, but also getting a handle on everyday expenses. Because, no matter how you look at it, paying off debt and budgeting wisely go hand in hand.

Start by prioritizing your debt payments

Some debts work for you and some work against you. Debts like student loans and mortgages that are taken out for a benefit, for instance to create career opportunities or to purchase a potentially appreciating property, can work in your favor. They're usually lower interest and may have some tax advantages.

With these debts, while you have to make your payments on time, you don't necessarily need to focus on paying them off quickly at your stage in life. In terms of your student loans, just be sure to make at least the minimum payment on each loan to keep the government at bay and protect your credit rating.

High interest consumer debt like credit cards and car loans is another story. This is potentially costing you a bundle. So I'd focus on paying these off first with a bit of basic money management.

Start with your credit cards:

—List your credit cards and balances, from the highest interest card to the lowest.

—Pay off the highest interest card first, paying more than the minimum each month if you can.

—Continue to at least make minimum payments on the rest.

—Work your way down until all the cards are paid off.

Another way to approach multiple credit card debts is to consolidate them on a low interest card and pay the maximum that you can afford each month. But look at credit card consolidation offers closely. There are often fees involved.

When you have the credit cards paid off, direct any extra money to your car payment. With that taken care of, consider increasing payments on your student loans, once again focusing on the higher interest loans first.

Put payments on automatic where you can

Once you have your debts outlined and prioritized, set up automatic bill pay wherever possible. It will help you make payments on time and keep you focused on paying down your debt. I'd also suggest making an automatic deposit to your savings account each month to create an emergency fund. With these payments automatically deducted from your checking account, you won't be tempted to spend the money on extras.

Take another look at your budget

Speaking of extras, you now need to take a realistic look at your overall expenses. Write down the essentials — mortgage payment or rent, utilities, food, health insurance, transportation, school costs, childcare, loan payments — anything that's absolutely necessary for you and your family. Now write down the nice-to-haves — movies, restaurants, new clothes, video games — all the things you'd like to provide but don't really need. Put real numbers next to these items to see how you currently spend, or perhaps overspend, your money. While it's not easy, you may have to cut back for a time in order to stay on top of debt.

Get your kids involved

If you do need to cut back, don't apologize to your kids, enlist their help. Make a game out of finding the best deal in the grocery store or when buying clothes or toys. Have them save their allowance or gift money to contribute to the special things they want. Even young kids can learn valuable money lessons by making choices. Because that's the key to managing debt — making balanced choices so you can handle both your needs and your wants with the money you actually have to spend. Best of luck.

Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER(tm), is president of Charles Schwab Foundation and author of "It Pays to Talk." You can e-mail Carrie at [email protected]. This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. To find out more about Carrie Schwab-Pomerantz and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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