About · Press · Contact · Write For Us · Top Personal Finance Blogs
Featured In:

Five Steps to Getting and Staying Out of Debt (Step 2)

By Erik Folgate

The second step is drafting and sticking to a written budget. The reason that this is the second step is because you will never know how much money you can contribute to getting rid of your debt without writing out your projected budget. There are two kinds of budgets. One kind of budget is merely just a tracking budget. You keep track of what you are spending and where you are spending it, and then you try to make adjustments at the end of the month to areas where you spent too much money. The other kind of budget method is when you project your monthly expenses and stick to that projection. This is the method that I like to use. It is very simple.

  1. First, write out all of your projected household income for the month.
  2. Then, write out all of the monthly bills that you are certain you will be paying each month
  3. The next step is to project your expenses for things like food, gas, clothing, and other miscellaneous items or activities.
  4. Start alloting separate funds for things like car repair, house maintenance, and other events that you may foresee having to pay in the future.
  5. Once you add up all of your income and add up all of your expenses, just subtract the expenses from the income and that figure is your disposable income. You are free to do whatever you want with this money. If you do the subtraction and it comes out negative, then you have a problem! You are spending more than you are making. You either need to do one of two things, tighten up your expenses, or boost your income. It is impossible to reduce your debt without money left over at the end of the month.

Microsoftoffice.com has some great templates for personal budgets in Microsoft Excel. I recommend these templates to help you create a quick and simple budget. Remember to be honest with your budget and try to predict expenses that will be coming up in the future.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

Related Articles

The content on MoneyCrashers.com is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, consult a licensed financial or tax advisor. References to products, offers, and rates from third party sites often change. While we do our best to keep these updated, numbers stated on this site may differ from actual numbers. We may have financial relationships with some of the companies mentioned on this website. Among other things, we may receive free products, services, and/or monetary compensation in exchange for featured placement of sponsored products or services. We strive to write accurate and genuine reviews and articles, and all views and opinions expressed are solely those of the authors.

Advertiser Disclosure: The offers that appear on this site are from credit card companies from which MoneyCrashers.com receives compensation. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages. MoneyCrashers.com does not include all credit card companies or all available credit card offers, although best efforts are made to include a comprehensive list of offers regardless of compensation. Advertiser partners include American Express, U.S. Bank, and Barclaycard, among others.