A Debt Detox – The Debt Diet Plan
No one likes dieting. And, truth be told, we all eat more once we’re off the rotten things anyway, thus making the previous three months of agony and denial completely unnecessary.
So unless we want to live our lives permanently on a diet, then an alternative may be a clever idea. Hence my uncomfortable reaction to the Debt Diet, propounded by a lot of influential women.
The ideas of the Debt Diet are good, and are incorporated below. But they are built around the short-term, and financial change needs to be long-term and sustainable.
So here’s a Diet Detox- something to kick you off, and get your finances clean and zen-like, and to put you in a place for long-term financial healthiness.
Step 1: Get Real
How much debt do you have? Don’t write off the loan your olds gave you a couple of years ago, thinking it’s not real debt. Sit down and work out exactly how much you owe, and what the interest rate is on all of your debt.
Step 2: Track It Down
Where the money goes, that it. Track your spending, and learn to account for every dollar. No detox is complete without a deep and realistic knowledge of your own finances. Maintain a spending diary- it’s the most important step in the path to detoxing your spending habits.
Step 3: Stop The Flow
Now you know where it’s going, you need to stop spending money. Easy to say, hey? Not that hard to do as well. Don’t visit the ATM more than once a week. Once disposable cash is gone, it’s gone. Time to read the classic novels you’ve always meant to get to. Start having swap parties with your friends, set up a fund for birthday presents and budget it properly. Use cash, always. And presto, you’re spending less already.
Step 4: Monthly Spend
Own your finances. If you can create a spending plan for the month ahead, you’ll become empowered about your own finances. The more detailed and realistic it can be, the better. Review your plan each month, and allow for occasions that will blow out the budget. Adding a Murphy Law’s allowance isn’t a bad idea- in case of things going wrong, add 10% to the spending budget. If nothing goes wrong, you can add that to your debt repayments as well.
Step 5: Grow It
Now you’re detoxing all the bad things from your finances, maybe you want to think about adding a couple of positives back in. Like, can you find a way to earn extra income that can go towards paying off debt? Or is your way of living (the car, or the house you’re currently renting) a bit above your paycheck? Hard calls, all of them.
Step 6: Prioritise
A debt detox needs a good dose of realism to survive. So, list your necessities and how much they cost you a month. These are the things that you need to survive and flourish. This does not include pedicures or souped up cars. This means food, rent or mortgage, phone, transportation and a bit of money set aside for emergencies. Then organise your taxes, and set aside the amount you’ll need. Then you can look at how much money you can put towards paying down your debt.
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