Oprah's Debt Diet: Step 8, Part 2: Why You Shop and How to Save

Step 1: How Much Debt Do You Really Have?

Chart Your Debt

Get Your Credit Score

Prioritize Payments

Step 2: Track Your Spending and Find Extra Money to Pay Down Debt

Find Your Latte Factor®

Use the Latte Factor® Calculator

Step 3: Learn to Play the Credit Card Game

Pay More than the Minimum Payments

Lower Your Interest Rates

Four Tricks of the Credit Card Companies

Which Credit Cards to Tackle First

Step 4: Stop Spending

Step 5: Create a Monthly Spending Plan

The Monthly Spending Plan Worksheet and Pie Chart

Use the Monthly Spending Plan Calculator

Assign Paychecks to Expenses

Step 6: Take Big Steps to Grow Your Income

Facing Hard Choices

Selling Assets

Earning More Money

Step 7: Prioritize Your Debts and Raise Your Credit Score

Prioritizing Your Debts

Raising Your Credit Score

Step 8: Understand Your Spending Issues…and Save!

Why Do You Shop? Self-Assessment Quiz

How to Protect Yourself and Start Saving

Choose a Topic

Budgets and Tracking Expenses
Buying or Selling a Home

Credit Cards

Financial Planning and Investing
Credit Reports and Scores

Savings and Retirement

Loans

Meet the Experts

David Bach

Glinda Bridgforth

Jean Chatzky

People Who Saved Big Money

Share Your Stories on the Message Boards

Before and After Oprah's Debt Diet

The Bradleys

The Egglestons

The Widlunds

Watch Video Highlights

Buy Oprah's Debt Diet DVD

Step 8: Understand Your Spending Issues…and Save!
Part 2: How to Protect Yourself and Start Saving Now

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The other key to staying ahead of the game is saving. You need a savings stash to keep you from sliding back into debt. Think about it: You're moving along, paying down your credit cards, making terrific progress. And your dog gets a nasty double ear infection. Between trips to the vet and pricey medications, this ends up costing you close to $200. Where is that money going to come from?

Unless you have a stash of savings, you are probably going to put it on your credit card. Although you now know enough to put it on your lowest rate credit card, that purchase is going to set you back. It's going to impede your progress and it's going to make you feel rotten. That's why you need savings.

Turn Protection into Profit

As you start to pay down your debts, siphon off a chunk of money each month—3–5% is a good start but aim for 10%—and put it into savings.
Stash your savings in a safe place, such as the highest paying money market account you can find (go to www.bankrate.com to find the best rates today)—until you've got a substantial emergency cushion equivalent to 3 to 6 months salary. That's your protection. If you get laid off, if the dog gets ill, if your transmission dies, you'll be able to live and pay your bills without sliding back.
Once you've got your emergency cushion, you can start investing that money in a portfolio of stocks and mutual funds that can help you build a real foundation of wealth for your future.

Check back soon for more steps in the Debt Diet plan!

Please note: This is general advice. You should consult with your own financial advisor before making any major financial decisions, including investments or changes to your portfolio. Harpo is not responsible for any losses, damages or claims that may result from your financial decisions.