Personal Finance 4 The People is pleased to team with others who are able to share their expertise in various areas. We hope to combine our efforts to bring a greater financial effort inorder to help you reach YOUR Financial Independence. Today's guest post comes to us from Karon Powell.
Spring brings with it the urge to clean and the desperate desire to lose weight in preparation for much warmer weather. This Spring instead of going on a food diet, I am thinking more about shedding my financial weight. There have been a lot of articles, TV shows and publicity about debt diets lately but what is a debt diet? A debt diet is simply a weight loss program for all the bills that are piling up in your life. There are quite a few diet options available and can range from twenty-one days to a full year.
After doing some research I found that there are several key features to a debt diet. The first feature is tracking your spending. In order to slim down you have to know what you are eating or how many calories you are taking in. With a debt diet you have to know how much money you are spending. The expense tracker can be as simple as a small notebook you keep to write down what you spend on a daily basis. And that means everything from a pack of gum to the impulsive splurge for a mani/pedi or new shoes. I track my spending electronically on my iPhone using the Lemon app. I also tried Mint.com and iSpending both of which are good overall budgeting tools (and they are free) but I wanted something, at least for the first few weeks, that just tracked my spending. After about two weeks I saw that one of my biggest expenses was eating out, the quick cup of coffee in the morning and lunch that I was too busy to make for myself at home. It added up to about $2,392 a year, enough for me to pay off two credit cards.
In this first stage you also have to be brutally honest about how much you owe. All that mail from creditors piling up in the mailbox, open them and write down in a separate section of your spending diary exactly how much you owe. This part is uncomfortable because it is overwhelming to think about the amount of debt you may have and the little to no money you are taking in that’s available to pay it off. But after looking at your spending you may find that those bills can be paid off over time just like my two credit cards. Now, instead of buying a coffee and lunch I spend that money by transferring the same amount to savings and paying a bill at the end of the month.
The second component of the spending diet is figuring out why you spend. After about two or three weeks of tracking your expenses it’s pretty easy to see where and when you spend the most. Are there emergency bills that pop up? Like the water bill you didn’t pay for the last six months that just kept accruing? Do you spend when you are under the most stress and just need a little treat that ends up costing more than you thought it would? When I was a kid if I did well in school my mother bought me a new book as a treat, yes, I was a nerd even then and loved books. Anyway, in my mind, if you do well you get a reward. Unfortunately, I carried that over into my financial life. So, after cutting back on expenses for three weeks I saw something to reward myself with and did. Of course, that ate up my newly accumulating savings and I was back to feeling guilty. However, like any diet there will be times when you slip up, just get back into it and stay focused. 
The third common step in most debt diets is to completely stop unnecessary spending. This is the exercise part of your debt diet. For a fixed period of time you are “allowed” to spend money, cash only, on the things in your life that are necessary. The point is to develop good spending habits and to internalize the difference between what is necessary and what is a want when it comes to finances. I need to take things in small doses so a twelve month spending diet was not ideal for my needs. Instead, I decided to participate in a twenty-one day debt diet. It is challenging to limit my necessities to food, shelter and bills but that is what I am doing. Overall it is difficult but I have found several websites and resources that are helpful including Oprah’s Debt Diet website and Michelle Sinlgetary’s money articles in the Washington Post. If you decide a debt diet is right for you take the time to research the different types, be brutally honest with yourself about your spending and debt and most important be forgiving. You will make mistakes, just keep moving and in time you will develop better money habits. 
