As we are working our way into a new year, many people are thinking about their resolutions for 2012. The No. 1 resolution that most individuals focus on is losing weight. I think it is time to try a new diet this year – a financial diet.
Most people give up on weight loss because they don’t see the results fast enough. They usually set their goals at 15 to 25 pounds and that can take time. The same can be true with paying off debt but you can start doing things to show immediate satisfaction. Here’s how.
First, you have to start by removing the temptation. When you first start a new diet, you always take the tempting foods out of the pantry. The same applies with debt.
Remove the credit cards from your wallet and cut them up. If you don’t have them with you then you are less likely to spend money you don’t have. Pay with cash and you will only spend money that you truly have and on items you truly need.
Next, develop your budget. List all of your necessary expenses. Make sure you cut back on everything that you can.
Example: If your cable bill is more than $50 and you are in debt, then you need to cut it back.
Your goal is to trim off the fat and keep the budget slim. Just like your diet.
Next, we are ready to start working on debts. This is the same as the weight we are working on in our diet. We have to develop a plan that best fits our needs.
The most successful plan I have seen is the debt snowball. This consists of making a list of your debts smallest to largest and applying all extra funds to the debt with the smallest balance. Make sure you only pay the minimum payment on all of your other loans.
When the first debt is paid in full, you will then want to put everything you can towards the next debt with the lowest balance.
Last, get an accountability partner. When you are dieting it helps to have someone who will exercise with you and keep you motivated. The same applies to budgeting and paying off debt.
Set your goals with your accountability partner. Determine what your spending limits will be. This means that before you can purchase something over a certain dollar amount, you must first get approval from your partner. This will help prevent impulse shopping. If you have to stop and call your partner, you will be less likely to spend the money.
You can do this. Develop a plan and stick with it. If you are having a hard time, get a financial counselor to help you. There are a lot of places out there that offer free financial services to make sure you are on the right road to a successful financial diet.
Jennifer Panther, certified financial counselor with Financially Focused, Inc.