Tips & Information

Oprah's Debt Diet

Now that you are rejoicing over your tax refund or grieving over your depleted savings account, after paying your taxes, it’s probably a good time for a discussion of the “Debt Diet”.

For you Oprah fans, this will be a review. For the rest of the readers, this will introduce you to Oprah’s Friday “Debt Diet” program that just finished a few weeks ago. I only happened to see the last summary segment, and was delighted to see that Oprah had taken on this topic.

The program featured three financial experts and eight steps to take for reducing your debt, which I will summarize below. If you who are already using my Budget Kit Workbook or have taken my “Budgeting Without Tears” E-course, you have started many of these steps already. However, remember it always helps to reinforce new information, so please read on. Oprah’s complete program is available under the Resources section below.

Step 1 – Know How Much Debt You Really Have
The point is to stop denying or being in confusion and to really face the reality of your true debt picture and what your lifestyle and debt is costing you.

Part 1 - Chart Your Debt
Oprah provides a form to outline this debt. A more complete and effective form is actually available in The Budget Kit print workbook and Excel version. http://www.moneytracker.com/books-TheBudgetKitExcel.htm

Part 2 – Get Your Credit Score (See Resources below)
Remember, you are entitled to one free report from each of the three credit bureaus.

Part 3 – Prioritize Your Payments

• Necessities – your mortgage, utilities, medical, child support
• Uncle Sam – your taxes and student loans
• Everything else

Step 2– Track Your Spending and Find Extra Cash to Pay Down Debt

Part 1 – Find Your Latte Factor™ (from David Bach, author of Automatic Millionaire)
Basically, anyone who has been using my books, The Budget Kit (print or Excel) or The Money Tracker will already have a strong sense of where their money is going and those spending favorites. Most who do, have told me they started to make inner attitude shifts and outer lifestyle changes. David Bach offers a handy calculator (See Resources below) so you can see the impact of your transfer of daily trickle-away-splurges to paying down debt.

Step 3 – Learn to Play the Credit Card Game

Part 1 – Pay More Than the Minimum Payments
The suggestion is to pay $10 /day more on your card debt for a faster payoff. If this is out of the question for you, my basic recommendation has always been do what it takes to pay at least another $10 on top of the minimum payment each month. Even this will still save you $1000s off the total interest, as shown in my Budget Kit workbook.

Part 2 – Lower Your Interest Rates
Be sure to see Resources below for some great scripts to use by Jean Chatzky (Money Magazine Editor and author) when calling the credit card companies.

Part 3 – Know the Four Tricks of the Credit Card Companies

• Interest Rates
• Late Fees
• Teaser Offers
• Annual Fees

Part 4 – Which Credit Cards to Tackle First
See Resources below for the link outlining an efficient order for paying off your credit card balances.

Step 4 – Stop Spending
A number of suggestions are listed in this section of the program. You can also read some of my articles on my website where I list a variety of ways to stop spending and save money.

Step 5 – Create a Monthly Spending Plan
This is the area where I have specialized for over 25 years and know that The Budget Kit effectively and comprehensively addresses all three parts listed in this program and more. In fact, one area overlooked (which I introduced over 25 years ago) is a solid outline of the periodic, non-monthly expenses throughout the year. I call this the "Missing Link" and a very important part of a complete and comprehensive monthly spending plan.

Part 1 – The Monthly Spending Plan Worksheet
A Monthly Spending Plan Worksheet from Glinda Bridgforth’s book is provided under Resources.

Part 2 – Use the Monthly Spending Plan Calculator
Check out the calculator under Resources below to see how your monthly plan fits with the take home pay spending recommendations.

• Housing 35%
• Debt 15%
• Transportation 15%
• Other Living Expenses 25%
• Savings 10%

Part 3 – Assign Paychecks to Expenses
Once you outline all of your planned expenses for the month, the next step is to create a system for paying each of the expenses, based on paychecks, savings, available cash or any other methods of payment. The Budget Kit offers a "Monthly Budget Worksheet" for every single month, which provides the column setup to help you work out a system for allocating how you will cover every single expense.
See Oprah's program for more ideas.

Step 6 – Take Big Steps to Grow Your Income

Part 1 – Making Hard Choices
These are choices like deciding to sell your home or move to another location, sell your car(s), or moving your children to public school.

Part 2 – Selling Assets
What do you have of value you can sell – home, other real estate, time share, vehicles, art, jewelry, antiques?

Part 3 – Earn More
This is certainly not an easy choice when you are probably already working hard and stressed to the max. Think of your choices for earning more – asking for a raise, find out what you can do to raise your paycheck; get a second job (like 4 out of 10 people are now doing to pay off debt); if you have a side business raise your rates or prices.

Step 7 - Prioritize Your Debts and Raise Your Credit Score
Be sure to review this section of the program. If you are still fuzzy on Credit Score issue, see the Resources below for the information on raising your credit score. Also, if you would like more personal hand holding with this process, I have included two excellent colleagues, Joan Silva and Lynne Boccignone under “Questions on Credit Reports or Repair?” section.

Step 8 - Understand Your Spending Issues…and Save!
Check out the Self Assessment under Resources. Definitely review this part of the program for a discussion on the issues reasons people shop: entertainment, mood repair, habit, impulse, compulsive behavior.
Start saving money every month.

I know this was a lot of information, but still important to review. When you do have extra time, I highly recommend you check out Oprah’s website listed below and read through the entire program.

If you have any questions or concerns, please remember I am here to help anyway I can.

As always, I appreciate the email feedback. Please keep it up! It’s always exciting to hear your comments.

For more information, feel free to contact me at
judycents@moneytracker.com

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