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Debt Diet: Lose Unwanted Debt

Set Up Your Own Debt Diet

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Many people compare getting out of debt to losing the extra weight you have put on over the years. A debt diet is one strategy that you can use to help you lose unwanted debt. Just as in a fitness regime you need to look at all areas of your life to have effective weight loss the same is true when it comes to shedding the extra debt. Although some people are able to go to the extreme and make big sacrifices to get out of debt quickly others will not be able to do this. It does not matter if some of the debt is better than others, you need to work to get rid of it all. Either way it is important to look at the things that got you into debt and make the necessary adjustments so that you do not go back into debt again.

1. Debt Diet: Assessing Your Situation

The first step in your debt diet is to figure out how much debt you have accumulated. You can decide whether or not you want to include your mortgage in this debt diet, but all other types of debt should be added to this assessment. Begin by listing all of your debts, the balances, the minimum monthly payments and the interest rates. Add up the total. This is often shocking for people, but it is a wake up call that can help you to change your situation.

2. Debt Diet: Setting Up a Debt Elimination Plan

A debt elimination helps you to get out of debt much more quickly. It gives you the order that you should pay off your debts, and because you are focusing the extra money at one debt at a time it increases the power of the extra payment. You can arrange your debts in two ways either from smallest to largest debt or from highest to lowest interest rate. The highest to lowest interest rate will save you money in interest, but the smallest to largest debt can give you a bigger sense of accomplishment and get the ball rolling. Once you have paid off your first debt you take that payment amount and add it to the next one on your list, which allows you to continue to increase your debt payments. You should understand your bank's policies about extra payments, so that you can make sure the majority of your payments are going towards your debt each month

3. Debt Diet: Adjusting Your Budget

Good financial management happens on purpose. That means that you know where you spend your money and why. The best way to do this is through a budget. A budget does not need to be restrictive you can still have the fun money that you want and stick to your budget. You can set up the categories anyway that you want to, but you should always spend less than you make. You should strive to find an extra $100.00 to $200.00 a month to put towards your debt at the very minimum. Living on a budget while you get out of debt will help you stick to a budget once you have finished and help you to stay our of debt in the future.You may also want to speed up the process by selling some items to earn extra money to put towards your debt. You use other strategies to find extra money for your debt.

4. Debt Diet: Looking at the Big Picture

You are in debt for one of two basic reasons. You either do not make enough money or you constantly over spend. It may be a combination of the two. It is important to address the reasons that got you into debt in the first place. If you do not make enough money you should consider getting additional training that will help you make more money. This in addition to following a budget will help you to stay on track. It is important to consider all of your career options and consider taking a second job while you are figuring out a permanent solution.

5. Debt Diet: Making a Lasting Commitment

Living debt free takes commitment, planning and discipline. It is possible and many people who are debt find that they have more money available to them to do the things that they enjoy the most. It is important to commit to living debt free and sticking to your budget. You can stop using the credit cards completely and begin saving to make your car and other large purchases with cash. This debt diet can free you so that you no longer worry about your money constantly and allow you to focus on what you think is most important.
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