30 Day Debt Diet: What to take, What to leave

[natfinfree]

30 Day Debt Diet: What to take, What to leave
By Nathalie Charles

I ran across an old article in a 2008 edition of a popular women’s magazine written by Sakina P. Spruell. The article was entitled, “30 Day Debt Diet”. It immediately caught my eye and I began to read the 6 steps recommended tofree oneself from a mountain of debt. The steps are as follows:

1. Decide to Deal-accept that you have a problem, do not ignore your bills OPEN THEM!
2. Make a budget-itemize sources of income and tally all expenses
3. Draw up a realistic pay-off schedule-figure out total outstanding balances and budget how much you can allot to debt payments
4. Eliminate Frivolous spending-make a list of needs versus wants. Cut back on entertainment, eating out and other extras
5. Generate More cash-get a part-time job, get a roommate, refinance your mortgage
6. Accelerate Payments-pay off debts with higher rates first. When one debt is paid off apply that payment to the next highest rate.

In my opinion, these 6 general steps provide simple and straight forward direction as to where to begin when drowning in debt and seeking a way out of the muck and the mire. 6 simple steps and 30 days to get it done, give one a sense of urgency to make an impact in a negative financial situation, quickly and strategically. No time to drag your feet with this one.

What to Leave
Since there is really only one recommendation that I suggest should not be followed, I will start with my Leave suggestion first. In Step 6 it states that one should pay off highest interest rates first. Dave Ramsey recommends that debtors pay off the smallest debts first. This strategy provides encouragement to continue on the path to paying off debt as you are able to quickly see progress. Even if it you must start with paying off a debt as little as $250 or less, you ahead of the game. Why? Because progress is progress. Each success will motivate one to continue toward the goal of becoming debt free one day.

What to take
I also have some additions that can make this great list even better. In step 2 it is recommended to make a budget. To be comprehensive and realistic I believe one should include ALL expenses, everything you believe you need. Examples of needs maybe vitamins, hair cuts/ mandatory grooming expenses, etc…In step 3 it is recommended that one decide how much can be allotted for debt payments. It is important to decide to pay more than the minimum payments if at all possible. Even an additional $5 added to a $25 minimum payment can make a major difference in interest payments and projected payoff dates. Step 3 states to generate more cash. Some additional means of generating money can be to sell some unnecessary items around the house on ebay or craigslist. Use additional income generated from sales to make lump sum debt payments and or put away in savings.
The final recommendation is the addition of a 7th step. I believe Step 7 should be to begin a $500or $1000 emergency fund. Why is this so important? Most people go into debt as a result of an emergency situation in which they had no fiscal resources to support them. In such a case, families and individuals are left to rely on credit or borrowing to resolve their emergencies. It is recommended by Dave Ramsey, Suzie Orman and Art Williams author of Common Sense: A Simple Plan for Financial Independence and other financial gurus to create an emergency fund, with urgency. The creation of such an account can prevent a situation in which debt is accumulated due to lack of preparation for unforeseen the circumstances that are guaranteed to arise in this life. Having the fund in place gives those who have it a peace of mind that you can’t achieve any other way. Knowledge of knowing that in case of emergency I know where to go is another form of encouragement in the debt management process that everyone should seek. I personally experienced it and it definitely allows me to sleep better at night. I am also very proud to say that I took the time to be prepared. So, if you are in a situation where you in need of a major financial overhaul, the 30 Day Debt Diet maybe just the right thing for you. Good luck and God speed in your pursuit towards financial freedom.

[cccfree]

Great stuff! I work for the consumer credit counseling agency, CCC, and I wish some of our clients followed these rules and made a habit of it!

[Jonathan K]

This is a great article! I was going to post a reply but I will do so on another thread instead. It became too long.