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.