What Is the Debt Diet?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 17 August 2019
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A debt diet is a strategy developed to help people who feel trapped by debt obligations and are willing to make changes in how they perceive and utilize money in order to pay off those obligations. Like a diet designed to help people lose weight, the debt diet is structured to include a series of intentional steps that over time help to change the way people manage money, helping to not only reduce the total level of indebtedness but also equip the dieter with skills that help to prevent amassing huge amounts of debt later on. Considered a very accessible debt management plan, the diet focuses on making accurate evaluations at each step of the process and committing to taking action in order to eliminate debt.

There are actually several variations on the debt diet. Most will include a core group of steps or ideas designed to help people face the reality of their debt situations and help them implement specific strategies that have the capability of reducing that debt. The diet will often begin with a period of assessment or evaluation. Here, the goal is to compile exact data on all debts owed and capture the data in a format that makes it impossible to avoid facing the facts.


This stage of the debt diet will require including information like the name of the debtor, the total due on the account, and the minimum monthly payment. Making note of the rate of interest that applies to each debt is also recommended. In some cases, debts or grouped or classified into sections, such as placing a mortgage and car payment into one category, while accounting for all credit cards or personal loans in another.

After compiling a current list of all debts, taking the time to create a workable budget is essential. At this juncture, the goal is to structure the budget to account for all minimum monthly payments while also allocating a portion of the income to line items like food, clothing, and shelter. Any surplus that remains can be allocated to retiring debt as well as saving a percentage of that surplus in some sort of savings. This approach helps to protect the credit rating, since all debts are kept current and the household essentials are secured.

From this point, the debt diet will require focusing in on specific debts and developing a realistic schedule to retire first one, then another. One common approach is to focus on a debt that is relatively low and can be paid off in a short period of time, using the combination of the minimum payment plus funds allocated from the surplus. After that debt is retired, those funds are then directed toward the next lowest debt in the sequence. One benefit of this approach is that smaller debts are dispensed with sooner rather than later, helping the debtor to build confidence in the ability to actually settle all the debts.

A different approach at this stage of the debt diet is to base the debt settlement process on the rates of interest that apply. In this scenario, the approach may be to pay off the debt with the highest interest rate, then settle the other debts based on the descending rates of interest. Depending on the individual’s circumstances, this approach may actually be a better option than basing the repayment strategy on actual amounts owed.

Part of the debt diet is learning how to curb unnecessary spending, live within the means, and incrementally set aside savings for the future. This will typically require significant changes in how money and credit are viewed. During the process of settling older debts, care should be taken to note create any new debt it at all possible. Learning how to resist accumulation of unnecessary debt will prove helpful even after the current debt load is settled, since the consumer will possess the skills necessary to assess both the pros and cons of buying anything on credit, and make choices that are more financially healthy in the long run.



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