THE MONEY DIET
Lori Z. Bahnmueller
Michigan Credit Union League - Your Money Matters
You can do it! Yes, you can take off a ton of debt this holiday season and keep it off into the new year! That's right! When you try the new Money Diet you'll take pounds of stress off your shoulders. Watch that bulge of debt you've been carrying in your wallet simply shrink away.
First, we need to make sure that the Money Diet is right for you. Take a moment and answer the following questions.
1.Do you usually pay only the minimum balances on your credit cards?
2.Do you juggle bills, allowing some to go past due so you can pay others?
3.Are you being contacted by collection agencies?
4.When you receive pre-approved credit card offers in the mail, do you sign up and think, "Great! I've got more money to spend!"
If you answered "Yes" to any one of these questions, the Money Diet is right for you. The Money Diet begins with a booster shot of self-esteem. You're not facing this problem alone. In fact, consumer debt has reached an all-time high of over $1 trillion in 1996 and it took millions of others to rack up that tab.
Now it's time to track your spending habits. Go through your checkbook and recent receipts to get an accurate picture of your spending. Start carrying a small notebook with you to track your daily spending. Break down your spending by categories such as rent or mortgage, auto, groceries, dining, clothing, household maintenance, insurance , taxes, utilities, etc. Look at just how much goes into each area. Don't let poor record keeping detour you from starting the Money Diet. If you haven't kept good records do your best to list everything you can remember and keep records in the future.
Add up your spending (and savings!) and see how close it is to your income. If you spend more than you earn, look over the list to see where you can cut back.
A few tips to cut back on budget fat:
* Examine your credit card and loan balances; determine the interest rates for each. Begin eliminating the debt with the highest interest rate; even if this means tapping into your savings. If you owe money at 18% interest and are earning 4% on the money in your savings account, you're still losing 14% a year.
* Cut back on dining out. The average American spends around $4,000 a year to eat out. How many bills could that pay off?
* Increase the deductibles on your auto insurance. Bumping a $100 deductible to $500 could reduce your premium up to 30%.
* No need to keep sweets in the house if you can't eat them. Get rid of those extra credit cards, especially if you're paying annual fees.
* Search out a credit card with a low interest rate or call your credit card company and demand a lower rate from them. Transfer your high-interest debt to a low-interest card.
* Eliminate unnecessary services. Do you really need Call Waiting on your phone or that premium cable TV channel? The extra $5 or $10 you save per month can add up to hundreds of dollars over a few years.
* Stay away from new car lots! New cars and even newer-used cars are undeniably wonderful and one of the easiest ways to drop $20,000. If you have a safe, reliable car, learn to live with it. If you miss that new car feeling, try taking your car to a detailing specialist and have them give your car a through cleaning and a tuneup. It will cost far less than other alternatives.
* Stop charging new bills. Pay cash instead.
Finally, all good diet plans acknowledge the importance of exercise and the Money Diet is no exception. Exercise equipment is one of the most superfluous purchases consumers make. It's expensive and seldom used. If this sounds like you, we recommend that you pull out all of the equipment you've purchased, polish it up and sell it. Use the profits to pay off a bill. Afterwards, go for a long walk. It's free.
As the creator of the Money Diet, I understand you might be feeling overwhelmed and frustrated, and tempted to just walk away from it all. Counseling is available. Your credit union or bank may offer financial counseling or you can contact Consumer Credit Counseling Services. CCCS is a non-profit company which works with the debt resolution process to help set things right. Call (800) 388-2227 to reach them. There is help out there. Don?t try something as desperate as debt liposuction (also known as bankruptcy). While such extreme methods may give instant gratification, they have long lasting scars.