Step 5: Create a Monthly Spending Plan

In this lesson, Oprah, the richest woman in the universe, recommends coming up with a sensible monthly spending plan. It should be laid out about 15 days ahead of time so that you can make adjustments if you’re going to have more or less income than you expected.

Oprah recommends the following distribution of wealth:

Housing	35%
Debt	15%
Transportation	15%
Savings	10%
Other Living Expenses	25%

Fortunately, I’m ahead of the game in regards to housing and transportation costs. And I have some degree of control over other living expenses. (though I’m not very good at exercising it.)

Oprah also advises assigning paychecks to specific expenses. I’d never really thought of budgeting in those terms. The gist is, you subdivide each paycheck to cover your monthly expenses. It makes perfect sense. But, I’ve always thought in terms of big bucket of money that fills up and empties out at the end of each month.

To keep an eye on the bucket, I’ve been updating the Google Spreadsheet. The daily spending tab I try to update throughout the day. The debt summary gets updated once a week.

[tags]Oprah, Debt Diet, Debt Reduction, Google Spreadsheet[/tags]

Step 4: Stop Spending.

Now why didn’t I think of that? Yes. It’s so clear, so simple. Stop spending.

I kid Oprah. This is actually pretty good advice. She has some specific recommendations, like only make one trip to the ATM each week, create specific funds for big expenses, and tell people about what you’re trying to do to rally support.

While this blog isn’t inteded to rally anyone to anything, I do hope that by forcing myself to disclose what I’m up to I will be more motivated to succeed.

Speaking of which… I have already cheated on the debt diet. I bought a Canon Digital Rebel Camera as a gift. This flies in the face of everything Oprah has been trying to teach me. But it had to be done, and thankfully I did it before moving on to step 4. I had no idea that I needed to stop spending in order to start saving. Seriously, no idea at all.

[tags]Oprah, Debt Reduction, Canon Rebel XTI[/tags]

Step 3: Learn to play the credit card game.

This portion of the debt diet begins with a grim admonition for those who have fallen into the trap of revolving credit. Pay the monthly minimum at your own peril!

I’m with you O. I looked into the snowball method of debt reduction, where you pay off the debts in order of smallest to largest irrespective of interest rate. This method sounded appealing because because snowball is a euphemism for a sex act, as well as the name of a well intentioned and much maligned imaginary pig.

Oprah suggests an elaborate calculus for divining the order in which debts should be paid off. The acronym is DOLP, which is not as catchy as Snowball. DOLP stands for Dead on Last Payment, and is gleaned my mixing your Swiss Latte Fund with bird entrails and the menses of an unshorn virgin. I’m going to forgo that and just stick with interest rate as my bellwether. Honestly, I don’t think my debt situation is complex enough to warrant an avian sacrifice.

As part of the debt diet, I’ve made an appointment on my google calendar to call the credit card company about reducing my interest rate. This is very difficult for me. I’m not confrontational by nature, and I hate asking for things. But Oprah commands it. So it must be done.

[tags]Oprah, Debt Reduction, Snowball, Google Calendar[/tags]

Step 2: Track your spending and find extra money to pay down debt.

For this part of the debt diet, Oprah keenly observes that you can find extra money to pay down debt by eliminating some of the little impulse purchases that you make every day. This is similar to the financial advice you’ll find on Feed the Pig, another debt reduction site.

So, do I feed the pig, or go on a debt diet? These messages are so mixed. Do I run to Oprah’s warm bosom, or the creepy snorting porcine gentleman?

I will go on the debt diet because the pig has really really irritating sound effects. They are nothing compared to the dulcet, smokey, tones of my Oprah’s melodious voice.

My Latte Factor looks like this:

Coffee/Tea – $4.00
Lunch @ work – $8.00
Vending Machine – $1.00

Total – $13.00/day
Month – $390
Year – $4680

Granted, that’s a ballpark daily figure, I haven’t actually done the form yet. But I suspect that if you were to average out a year’s spending, it’s about right. The yearly amount is pretty astonishing. If you want to try the calculator yourself, you can find it here: Oprah’s Feel-Bad-About-Your-Spending-Habits Calculator.

Over 30 years, Oprah tells me that my Latte Factor savings could add up to quite a lot:

So what does this mean for Operation Blue Hippo? Well, clearly I need to spend less on miscellaneous incidentals throughout the day.

OPERATION BLUE HIPPO – STEP 3: REDUCE DAILY SPENDING BY 50%

No, I’m not going cut out all lunches at work, or all coffee. That would just make me resent this whole endeavor. Instead, I’m going to try to cut down by half, which I think is doable. I’ll use my ATM statements to track how well I’m doing. I should be spending no more than $45 per week on sundries.

Wish me luck!
[tags]Oprah, Debt Reduction, Latte[/tags]

And wouldn’t you know it, her talents extend to financial advice too! That’s right, by way of LifeHacker, I’ve discovered…

THE OPRAH DEBT DIET (yum!)

STEP ONE: HOW MUCH DEBT DO YOU REALLY HAVE?

Part 1 – Figure out how much debt you’ve got

Way ahead of you Oprah. I’m using a slightly different tracking method than the big O reccomends, because I’d like to track my debt over time. I’ve set up a google spreadsheet to handle it.

Part 2 – Get your credit rating

Got it. Last check my FICO was 720. Not the best. But, not the worst either. There’s a lingering blight on there that will be with me for awhile.

Part 3 – Prioritize your debt

This one’s pretty easy for me. I don’t have a mortgage. My car is off the road since I don’t really need it. And, I ate all the children. So that means after rent and phone, I can prioritize credit cards and student loans by interest rate. So far so good.

Next OBH post, I’ll move on to Oprah’s latte factor. Sounds delicious!
[tags]Oprah, Debt Reduction, Google Spreadsheet[/tags]

Personally, I’d like to believe that portly African mammals rise from their watery homes to give away consumer electronics purely out of the goodness of their big blue hearts. But, as it turns out, this is not the case. The blue hippo’s financing methods may suck you down into an abyss of financial ruin.

No, I have not fallen victim to the blue fellow’s tricks. But, I have slid down the slippery slope of deficit spending. I know I’m not alone in this. But, all the same, I’d like to take care of it before it consumes me utterly.

Here’s the debt:
Student Loans – $6007.82 (ugh)
Major Credit Card – $1969.94 (guh)
Other Credit Card – $1272.24 (bleh)

Total Debt – $9,250.00 (holy crap!)

That’s kind of alot. I’m not certain that I can pay it all off in a year, but it’s worth a shot.

Fortunately, to get the ball rolling I’ve got an expense report from work that I need to submit which should cover a big chunk of one of the credit cards.

OPERATION BLUE HIPPO – STEP ONE: SUBMIT EXPENSE REPORT

OPERATION BLUE HIPPO – STEP TWO: PAY OFF BIG CHUNK OF MAJOR CREDIT CARD

So why is this project called Operation Blue Hippo, since the blue beast wasn’t to blame for my financial woes? Well, I’m calling it that because part of this mess is a result of me buying some computers last year on credit. Then to my discredit, I let the balance sit there while I invested in other endeavors and diversions. This is similar to many tales of woe sung by victims of the hippo, but different in that I have only myself to blame, and not a hungry hungry trickster.

So, steps one and two look pretty straight forward. I’m going to add them to my handy maunderlust Google Calendar.

By the end of the weekend I’d like to have the next steps for the financial plan laid out as well.

Fun!

[tags]Blue Hippo, Debt Reduction, Google Calendar[/tags]