I’d like to congratulate everybody who successfully made it through the first month of debt payoffs and those who don’t have credit card debt or payday loans! You are doing better than a lot of Americans that are loaded down with high interest debt and not doing a thing about it!

It’s not time to stop now though. To become financially independent, you’re going to need to continue down the path of paying off debt. We’re not going to stop focusing on debt payoff until all that is left is the mortgage – if you have one – or until you have only low interest debt left (<5%).

Hopefully you now know how much you make and spend in a month. You’ll want to figure this out if you haven’t already!

Now it’s time to do something that some people think is a drag. It’s time to make a budget! You see budgets aren’t a drag – being broke is a drag.

Obviously I’m just some dude typing stuff into a keyboard, but maybe your current monthly budget – even if you haven’t written it down – looks like this:

Income(take home pay) $3200
Housing $1050
Rent $1000
Misc costs $50
Utilities $250
Water $30
Gas $60
Electric $60
Cable/Internet $100
Health Care
$250
Groceries $250
Cell Phone $120
Transportation $650
Car Loan $400
Car Insurance $100
Gas $100
Maintenance $50
Other Necessary $130
Hygiene/Grooming $30
Clothing $50
Misc. Necessary $50
Niceties $275
Eating out $150
Alcohol $75
Coffee $50
Student Debt Payments $175
Credit Card Debt Payments $50

There are all types of things wrong with this budget if you’re in debt! How much did you spend eating out? Why so much for the cable and internet? Do you really eat that much and fancy food? A $400/month auto loan payment? I think you get the point. Clearly your specifics are going to be different, but I’d be willing to bet that you can make some changes. If we make several changes to this person’s budget, they can pay off their debt much faster!

Income(take home pay) $3200
Housing $1050
Rent $1000
Misc costs $50
Utilities $210
Water $30
Gas $60
Electric $60
Cable/Internet $60
Health Care
$250
Groceries $200
Cell Phone $80
Transportation $450
Car Loan $250
Car Insurance $75
Gas $75
Maintenance $50
Other Necessary $95
Hygiene/Grooming $20
Clothing $25
Misc. Necessary $50
Niceties $100
Eating out $50
Alcohol $25
Coffee $25
Student Debt Payments $175
Credit Card Debt Payments $440
Emergency Fund Savings $100

These budgets assume just a single person, I’ll be creating a couple pages for people in other situations. For now though, look at how much more this example person is going to be able to save and/or put towards debt!

Here are the changes that this fictional person made to save money:

  1. They cut cable and got streaming TV instead
  2. Quit letting food go to waste and ate leftovers
  3. Got a cheaper cell phone plan with less data
  4. Got rid of their overly expensive car for a used, cheaper, more efficient car
  5. Switched car insurance to a cheaper insurer
  6. Decided their wardrobe was good enough and cut spending on clothing
  7. Stopped going out as frequently and went to cheaper restaurants

A few changes can make a huge difference, and to be quite honest, you really can make more substantial changes – and probably should if you have a lot of debt! With the new budget, you can pay off those credit cards years earlier! After you pay off those credit cards, you’ll be able to roll the payments into your student loans – so they’ll be paid off years earlier too. You’ll also be able to create an emergency fund, which will be a major savior if you have a medical, job less, or major vehicle emergency!

Even if you don’t make all these changes, making just a few of them will save major money! Get your new target budget built and start crushing that debt!