In Step #1 we wrote down every expense and put them into categories. Each category should be highlighted with a different color or organized in an app. Now go through each category and decide what is truly needed and what is excess.
Food is usually the easiest category to start cutting and the one with the most excess. What about eating out? Is that necessary or a want? Drinks bought at gas stations or coffee at Starbucks? What about all the snacks that are calling your name at the grocery store? Tip: Never go shopping when you are hungry! Decide what is absolutely necessary, and everything else is excess. Usually the food category can be cut in half; that’s a lot of money.
Do the same with all the categories. We waste trips driving to the store and running errands and many of those trips could be consolidated. Can you cut back on cable or eliminate it all together?
Once you decide on a budget for each category, decide how you will separate that money. I use an app called Easy Envelope Budget Aid, but it is just as easy to set each amount in a separate envelope. If your grocery budget is $100 for a week, put that amount in an envelope and pay out of it. When the $100 is gone, you have none left until next week. I actually think it easier to physically have the money in envelopes. It creates a better picture of how much money you have and when it is gone.
All the excess can now be used to start paying down debt. I do suggest you create a small budget just for fun. It can be used to eat out occasionally, buy something, or can be saved monthly to build for a vacation.
Also, include a budget for giving. I believe in giving to my church, but for you it may be a charitable organization, or both. Giving is an important aspect of getting out of debt. You reap what you sow, and money needs to move. You can’t be blessed with more, if you never give any away.
Be sure to leave a comment to let me know how finding the excess is working. It’s not easy, but neither is paying for debt forever!