The Debt Diet Challenge Week #2: Our Participants Weigh In

This is the second installment of The Debt Diet Challenge, in which Credit.com follows the lives of five people selected to take Jean Chatzky’s Debt Diet to get themselves out of debt and on track to a better financial future. Every week, Jean Chatzky will update us on the participants’ progress, and the participants will blog about their experiences with the program.

Penny

I continue to track my spending and I realize that I spend way too much on eating out. While I expected this to be higher than normal due to my vacation, it continues to happen now that we are home. I have groceries here and normally my husband (who is retired) will cook supper, but for some reason he hasn’t wanted to cook. When I get home, it is late and I am usually famished and want to eat ASAP. We have talked and are going to try to improve in this area.

I talked with Jean Thursday and learned that I have been doing my payments on my credit card all wrong. Normally I pay more than the limit on all my credit cards. I end up using the extra payment throughout the month. I paid off two loans earlier this July (less than a payment was due on each one). I was going to start to save some money when Jean told me to apply what I was paying on those loans to the credit card with the highest interest. That is when I realized and confirmed with Jean, that I should be putting all my extra income on the highest credit card. I am now paying $10.00 above the minimum on all credit cards with the additional money going on the highest interest card. I should have this card paid off in 3 months if I continue to do this. Then Jean told me to work on the next highest card and so on. I also need to put my cards away—well, all but one—and only use that one card for emergencies only. I have a credit card that currently offers 10 cents off a gallon of gas, so I pay extra on that card and use it to benefit my budgeted gas money. That is my “one” card I carry. Jean said this was a good idea and how I need to look at credit cards (how they benefit us). I am so happy that I have 2 loans paid off and now am working on a credit card balance that I have had for about 3 years and haven’t seen much of a dent in the balance. I am very excited to work toward that goal. This was an “a ha” moment. To think had I been doing this earlier that credit card would probably be paid off by now. Also, this high interest card has been closed by the vendor for the past 2 years. I have made my payments on time and above the minimum and they refused to lower my interest when I called them in January. I probably need to try again.

This program has helped me and my husband watch what we spend together. I was worried he wouldn’t help and not care, but happily I was wrong. I have told everyone I know about me being on this program and they are all supportive. I even blog on my Facebook page on my accomplishments. That is how excited I am to know that someone cares about helping me. Thank you for offering this wonderful opportunity.

[Related article: Jean Chatzky’s Debt Diet: A Behind the Scenes Look]

Read Erin’s story »

Erin

I’ve made it to week 3 of the Debt Diet plan and so far I like what we’ve been able to accomplish. I’ve successfully refinanced both of our cars and have been able to drop the APRs for both of them down to 4% or less—an accomplishment that I’m extremely excited about! I’ve also looked into changing our auto insurance and have found a rate that will cost us $30 less a month. So, over the last three weeks, I’ve managed to save us $200 a month—that’s $200 more to throw at debt or put into our savings account.

One of the struggles I still face is getting our lower balance retail cards paid off. We are notorious for signing long-term 0% interest finance deals and have some low balances to pay off on these cards. I feel like getting these cards paid off over the next 6 months will help to boost my self-esteem but the Debt Diet recommends paying off those debts that carry the highest interest rate. This is a huge change in the way I think and I’m still not comfortable with it. I like the feeling of getting debt paid off and will feel like we’re accomplishing things more quickly if we get those piddly, no interest debts paid off in the next 6 months. Since our higher interest debt is due to be paid off in the next year, what is the true risk of getting the no interest debt paid off first so I can start tackling the high interest debt? Is it better to pay lower interest or is it better to feel like you’re making progress? I’ll be asking Jean this question when I talk to her later this week to find out her take on it.

What I do find great about this experience has been having an outsider help to hold us accountable to our plan. Holding each other accountable hasn’t worked for us in the past, so I would highly recommend finding a friend outside of your marriage or family who you have to report to on a weekly basis; someone who will challenge you when you spend money you shouldn’t and help praise you when you spend money the way you should.

Till then I’m,

Erin

[Featured tool: Get your free Credit Report Card from Credit.com]

Read Chris’ story »

Chris

I had a few days of no spending—awesome! On Thursday night, I paid ahead on bills so that I can pay $830 to repair my sidewalks this coming week. I decided to be frugal the last two weeks and the next two weeks so I can pay cash. It will be tight! I get paid on Friday and will pay for the sidewalk and my regular bills. Previously, I would have run the sidewalk on a charge account. My trauma this week: I am mowing my own yard which is saving a significant amount. I was mowing my front yard-hit something and the mower died. Stopped dead! In my simple mind, I hope that parking it in the garage for a week, it may start for me this weekend. I will talk to it nicely, feed it good gasoline and oil, and beg. If it does not start, I will have to pay someone to mow; and I will need to take my mower to the shop to fix—not budgeted in the same two-week pay cycle with the sidewalk repairs. I may have to bake a neighbor a cheesecake or offer up a fine bottle of wine in exchange for mowing.

Bartering is good!

Good conversation with Jean this week. I was able to report that by following her Debt Diet and modifying a script she provides, I was able to reduce my cable bill by $65 a month. Awesome—I was ready to cancel cable! I shared my adventure with family, friends and coworkers. Some are cheering and some are joining my effort to reduce debt and increase savings. I shared my cable/Internet savings with coworkers and 3 of them have made the call and have great bundled rates for the next 12 months!

It is wonderful to have family and friends join and share the journey and rewards. The sharing was difficult, but instead of making judgments, the majority wanted to join in some way. It varied from sharing lunches we brought to work instead of eating out, to discussing ways we could save more. For the bonus round—I lost more weight in week 2.

Smart money choices equal smart food choices—who knew??

[Featured Product: Compare prepaid credit cards]

Read Melissa’s story »

Melissa

This week was a success because I have already started to see reductions in the debt.  We have stopped using credit cards completely, and I am tracking our spending on a daily basis. It has become a part-time job but the rewards are worth it.

We had some tests this week, but I think we passed and it feels good to celebrate the small victories.  Our dishwasher broke this week and we called the Sears repairman and paid cash instead of running out to buy a new one. Then a day later, my son dropped our IPad and shattered the front screen.  Before the Debt Diet my husband would have used this as an excuse to upgrade to the new version and used credit to do so.  We got a quote from the ‘IHospital’ (yes there really is one) and we are going to wait and save up some cash and ship it off to have surgery. I brought my lunch to work every day and did not even feel tempted when my co-workers were ordering out from our favorite local lunch spot. My lunch from home actually tasted better when I realized how much money I was saving eating it. I am trying to find the pleasure in the small things.

Today a colleague of mine invited my husband and me to the Dominican Republic with a few other couples in November.  Yet another temptation!  The pre-DD me would have jumped at this opportunity to check out a new vacation spot.  Four nights was going to run about $2000 all-inclusive.  A great deal!   The words “book it” were on the tip of my tongue but I instead said we were working with a financial planner to get out of debt and save for the future and wouldn’t be able to go. I am used to being the fun one, always planning the next vacation, always up for something new.  This conversation felt like a dry pill stuck in the middle of my throat without any water.  Without explaining the gravity of the situation, I do notice there can be a lot of peer pressure to spend and I am guilty of doing this to some of my friends as well.  I can remember saying or being swayed with “life is short, everyone is in debt…blah, blah, blah.” Unfortunately I’ve had to realize life can seem very long when you are not living in financial freedom and another vacation isn’t going to help the situation.

I have had to accept that this is going to be a long-term process and I am going to have successes and failures along the way. It took us about 5 years to get into this mess, and I am hoping to find a way to take only half of that time to get out and get on with building a financial nest egg. It is requiring a daily mind shift that I hope will eventually stick and become a way of life. The days of hoping it would all be solved with a lottery ticket or a long lost relative with a large inheritance are gone. Slow and steady wins the race after all, right?

[Featured Product: Get a free trial credit score]