Oprah's Debt Diet

Celebrated talk show host Oprah Winfrey is known for her popular TV program, her talented acting abilities in the movie, "The Color Purple", and for her zest for living. In 1994, America watched in awe while Oprah worked with personal trainer Bob Greene to beat her weight problems and slim down to a svelte, sexy-looking body size. Now, she has challenged America to slim down on another type of diet. Except this reduction plan won't help put you in a smaller size of clothing. Instead, it's "Oprah's Debt Diet", and it will help you change your spending habits and lose unwanted debt.

Oprah Winfrey compares overspending to overeating. So she enlisted the help of three financial experts- Jean Chatzky, Glinda Bridgforth, and David Bach- to develop a step-by-step plan that anyone can use to get out of debt.

The first step of Oprah's Debt Diet is to figure out how much total debt you have. When you start a weight-loss diet, you have to know how much you weigh so you can figure out how much weight you need to lose. It's the same with the Debt Diet. You have to know how much debt you have so you can figure out how much you have to "lose."

The Debt Diet suggests that you get credit reports from all three of the major credit agencies. These are Experian, Equifax, and TranUnion. These credit reports will unearth any old loans and unpaid accounts you may have forgotten about.

Next, you need to categorize your debt so you know what type of liability you owe. The categories you'll use are Secured Debt, Qualified Unsecured Debt, Other Unsecured Debt,
Student Loan Debt, and Tax Debt. Qualified Unsecured Debt includes credit card balances, medical bills, and other money owed that may qualify you to participate in credit counseling programs.

The second step of Oprah's Debt Diet is to start keeping track of where your money goes. You'll need to do this in order to see where you can save money. The saved money can then be used to reduce your debt. According to the financial experts, money that you typically spend on buying newspapers, coffee, gum, et cetera, can help reduce your debts in no time at all.

Once you find out where your money is going, you can "trim the fat." That means, you can
cut back on needless spending. It's estimated that most people spend 10% more than they earn every month. That extra money is often placed on credit cards.

Creating a weekly or monthly budget is a good way to keep track of your money and see where it needs to go.

The third step of Oprah's Debt Diet is to find out about the credit cards you have. Do you often pay unnecessary late fees? Do any of your cards charge you yearly fees? How much do you need to pay towards a balance to actually reduce your balance? Minimum monthly payments are usually small and "affordable". But if that's all the money you pay towards your credit card debt, the balance is going to keep growing instead of coming down!

You'll also need to get your credit card interest rates lowered. Often, lenders raise your interest rates if you make late payments, for example. Sometimes, if you contact your credit card companies, your creditors will lower the rates.

And the fourth step of Oprah's Debt Diet is to simply stop wasting your money. Spend less money on unnecessary purchases, and put the extra money towards paying off your debts.
According to the financial experts, the longer you abide by a budget, the easier it will be to stick to.

Just like a weight loss diet, you won't get rid of excess debt overnight. It will time and effort. But, once you start to follow Oprah's Debt Diet, and you see your debts getting lower, the results will encourage you to keep it up!