My Journey Out of Debt, Step #2: Tell Your Cash What to Do

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It’s sometimes considered a curse word in many households today: the dreaded budget. I know, I know . . . you’re probably rolling our eyes because you think it takes too much time, doesn’t work, whatever the excuse du jour. But that’s because you’re probably in the 60% that doesn’t use one. If you change your perspective just a tad and learn how to spend your money on paper on purpose, your budget will soon become your best friend. For me personally, once I mastered this step, getting out of debt was as easy as pie.

First, let’s get you acclimated to what a budget looks like in case you’ve never seen one. 🙂 Here’s an example of one on paper:

As you can see, it helps you to list your monthly outgo. To keep me honest, I started by saving every receipt for any and all purchases for an entire week. If I spent $40 on gas, $37 on eating out for lunch, $118 on groceries, $2 in the vending machine, and $23 on Starbuck’s, I made note of it. This helped me give every dollar a name.

Once I mastered my monthly budget on paper, I graduated to the automated formulas of Microsoft Excel. This is actually the budget I still use to this day:

(In case you’re curious, the yellow sections are for expenses that come up every once in a while, but because I know that the bill is coming, I tuck something away for those items every month so that I’m not surprised.)

A trick that helped me in the beginning was that I over-allocated in a few areas because I knew we were more likely to go over when it came to food and clothes. But once 3 months passed—and it will probably take that long for most people to find a rhythm—my budget fit our lifestyle and had me on track to reaching my goal. I was choosing to take the road less traveled and actually telling my money what to do each month!

TODAY’S BITE-SIZED TO-DO: Track your expenses for an entire week. Be honest with yourself because this is a pivotal step in helping you reach financial freedom. Save every receipt or make note of every purchase. Then block out 30 minutes, get out a legal pad, and chart your spending. If you blew $20 on miscellaneous, that’s fine! As long as you know where your money is going, you can allow that splurge. (I recommend downloading a basic budgeting form from There’s even a template for folks with irregular incomes, those who get paid on commission, etc.) Start small and create a mini-budget for one two-week period. After that initial two weeks, review your plan to see if you overspent or can cut back in an area so that you have more money to throw towards debt. Make any necessary edits and try again. Continue to chart your progress until you feel comfortable with a monthly budget you can stick to.

In the next post in this series, we’ll tackle cutting up the credit cards (ouch!) and building your mini-emergency fund. Read it now.

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11 thoughts on “My Journey Out of Debt, Step #2: Tell Your Cash What to Do

  1. Very good. Anything worth doing is hard and if you have a problem with money you need to look at why and where it is going… much like going on a diet. Joining a gym isn’t going to take the weight off. Finding out where and why you are spending and then looking into ways to cut or realign your spending is important. sigh… now to simply put this into action. I tackled weight last year and won… is 2011 the year of the budget?

  2. Very timely for the start of the year. I’m pretty good with my finances but must admit have let my budget slip for the entire year of 2010! Back on track this week. Thanks for your advice

  3. Great post! What I understand is that it’s 20% knowledge and 80% discipline. Thanks for laying out this doable plan for us girls! To hear someone who has gone through it and come out on the other side is inspiring.

  4. Great points, Pauline and Idara. Getting out of debt–much like losing weight–really is all about discipline and stick-to-it-ness.

    Natalie, glad to hear that you’re purposed to be back on track in 2011!

    Get ‘er done, ladies! 🙂 Appreciate your comments.

  5. Another fabulous post Courtney! Thanks so much for contributing here. I’m pretty good with budgeting and I keep personal and business balance sheets, budgets, and expense statements. I must admit though, sometimes my “Starbucks column” goes way over what I budgeted and that’s why I love your tip “Give every dollar a name!” It’s good to see how those small expenses can add up! Thanks Courtney and I look forward to the next post!

  6. Wow! How appropriate to read this at the beginning of a new year. So, to be honest….I don’t much like budgets, because they usually show us what we know but don’t want to acknowledge. This was just what I was looking for as I try to get my finances in order. Your information has been very informative. I had also began saving all my receipts; not only to see what I am spending my money on, but also to keep records for “tax” purposes. I expect at the end, it will be a real “eye opener”. Keep up the good work and hope to report back on my progress. Keep posting!!

  7. Appreciate the encouragement, Natalie and Alex!

    I agree that budgets are eye-opening. When I first started mine, I learned very quickly that I was spending too much on eating out (a guilty pleasure for this single mom) and entertainment. But now that I give each $ a name, I don’t feel bad when I treat myself to an extra movie or Cowboys game.

    Alex, if you’re interested, I could send you my Excel spreadsheet that already has the formulas built in. All you’d need to do is change the category titles to fit your lifestyle. Just let me know! In many cases, it takes the average American 18-36 months to get out of debt. Can’t wait to hear your story. 🙂

  8. Another great tool for budgeting is If you are comfortable with it pulling some of your transaction history from your bank and credit cards you can get some interesting graphs and trends about how much you are spending and where you are spending and then budget accordingly. I found it helpful for personal budgeting.

  9. Very true, Kara. I’ve tried but wasn’t keen on inputting all of my checking/savings, retirement account information online. Felt like I was giving away too much. IMO, I prefer an Excel spreadsheet that I own on my system. 🙂 And hey, I’ve actually gotten pretty good at manipulating graphs, too! 🙂 Thanks for sharing, and Happy New Year to you!

  10. Great info!! My husband and track our spending for a month and were blown away with the amount of money that we spend eating out.

    Now we live by our budget.

  11. It was not until I found the right tool for me, that I was able to get into budgeting because i needed something to help make the process easier and take the bore out of the chore.  I also did not want to give out access to my bank account as most of the financial website require.  For those not wanting to give out personal identity and access to bank accounts while realizing the power of personal budgeting and smart money management with the ease and convenience of an online web app, Out Of The Dark (OOTD) Budgeting is one little website gem to check out.  In addition to side by side budgeting and cash tracking, you can manage monthly put-aside amounts, transaction accounts for loans, credit card debt management and personal assets tracking, all for free on the web in total anonymity.  Google OOTD Budgeting or go to

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