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When James and I first began our journey to debt freedom, we made a LOT of mistakes! We also learned a lot, though most was through trial and error! While there are millions of tips out there for getting out of debt, here are the 2 most crucial things you can do to get started:
When we first got started, we never made a budget. Looking back now, it’s a miracle we don’t have twice as much debt-I don’t even understand how we made it month to month without one. There is nothing more important in making your money work for you than creating a budget.
Ours has evolved quite a bit through the years and we finally have something that works wonderfully! When creating your budget, do what works best for you. I LOVE pen and paper. I write everything: grocery lists, to-do lists, reminders, whatever the case may be-I love having it physically written down.
However, a written budget just does not work best for us. That’s how I started ours, but it took up way too much time redrawing boxes and doing the math myself each month. If you have the time and inclination to do a written budget each month, go for it! Just do what works best for your needs.
Back when I was doing our written budget, I still made a lot of errors. At that time, James used his phone to pay for some bills, I covered others, but it seemed like every month something would be forgotten. You HAVE to be on the same page as your spouse. If you’re sharing responsibility for the bills, communication is key!
When we realized that we needed to get it together, we both sat down and wrote down every single bill we owed each month, the due date, and the amount to be paid. I know this is Budget 101, but we were clueless kids and we just didn’t have our heads in the game until then.
Then, we made sure both of us knew the usernames and passwords for all our online accounts. While I wouldn’t recommend writing down all your usernames and passwords, if you’re forgetful or use a different password for everything, it’s good to have it somewhere. Now, it seems that every site wants something different for a password: some want special characters, at least one capital letter, a number, or an ancient Egyptian hieroglyphic.
Anyway, I do keep a list of our usernames and passwords but it’s in a kind of shorthand. We use variations of a few different passwords, so we both know that if I write that our password is K9$, that the password is Kyeqpebne9$ (this is just an example, obviously; I’m not posting my passwords on the internet). Find a shorthand that you understand but that no one else will.
I’ve heard some people tell me they use a phrase. For example: Please Excuse My Dear Aunt Sally would become “Pemdas” (by using the first letter of each word in the phrase), then insert a number and special character and you’ve got yourself a password.
Back to the budget. Once you have all your information together, you need to have a place for monthly income, then debt obligations, then all monthly expenses. I’ve seen many say to budget to zero but I do ours a tad bit differently, because I want to have some remainder for our beginning-of-the-month bills. We don’t get paid on the first of the month and sometimes our first paycheck isn’t until the 7th, and we have bills due before that time, so I want to have some leftover money from the previous month to cover those at the beginning, if that makes sense.
A couple years ago, I began using Excel for our budgeting. I absolutely LOVE Microsoft Excel and I use it anytime I can. (This is not a plug for Excel, I’m just a huge nerd, LOL!). I use it for budgeting, for our monthly grocery list (I’ve moved that from pen and paper, too…more on that later in this post), even our vacations. There’s just so much you can do with it.
At the top, I have a place to put our starting amount. However much we had in our checking account at the end of the previous month goes in this box. Then I have a table for our different sources of income, a table for our debt obligations, and a table for our monthly expenses. I’ve plugged in formulas throughout so all I have to do is plug in the numbers each month and it does the math for me.
I customize it month to month (I just copy and paste the whole thing into a new document) as needed. Since it’s not pen and paper, I just delete what isn’t applicable and add in what is. I also have extra blanks in our monthly expenses table for variables. For example, our inspection and registration has to be renewed in March, which isn’t a regular monthly expense. I just add that to one of the blanks in the table, along with the amount. Our income varies month to month as well, since James and I are both paid weekly. It’s so easy to just plug in the changes each month and let the formulas work for me. I create our budget for the upcoming month in the first or sometimes second week of the current month (so I made March’s budget the first week of February).
I also have our current debt totals in a table at the bottom left. I update these numbers each month so that I always know exactly how much we have left. It’s also satisfying to see that number go down each month. This is one of the things I talk about here to help keep me motivated and encouraged to not give up.
In the monthly expenses table, I have an extra column for the actual amount as well. This way, I can view side by side what I’m spending vs. what I budgeted. If I go under my budget, I move that excess to whatever debt we are currently paying extra on. This is also the perfect way to see where you are overspending each month and then you can adjust accordingly.
I absolutely love my budget spreadsheet! It has helped us (and continues to help us) so much. Because it’s such a useful resource, I’ve created a Customizable Budget Spreadsheet to share with you. It is easy to use-all you have to do is plug in the numbers for your budget and let the spreadsheet do the math for you.
Once we began using this budget, there was one category that we were overspending in every month: groceries! This leads to the next important thing you must do to get out of debt:
#2 Meal Plan!
This has been absolutely essential to saving us a TON of money each month. We basically have cut our monthly spending in this category in half by planning ahead and buying wisely.
We choose just seven meals each week and I make enough each meal for dinner and lunch the following day. I started doing it this way when James and I were both working away from home full time and the kids were in daycare. This enabled me to go ahead and use the dinner leftovers to pack the next day’s lunch. Not only did that save us money, but it saved a lot of time (and sanity!) in our mornings.
If you work somewhere that you are able to take and reheat your own lunch-do it! Spending $5-10 dollars on lunch each day (and I’d say that’s a conservative guess) really adds up.
I also highly recommend shopping at Aldi. When I first discovered Aldi, I didn’t really use them as much as I do now, and it still saved us quite a bit. Now, I buy almost everything at Aldi, then just supplement a few things from Walmart. I personally don’t buy meat at Aldi. Though it is a lot cheaper, I’ve gotten bad meat there a couple times. The great thing about Aldi is, if you do end up having to return something, they will not only replace it, but will also reimburse you for the cost. So you get your money back and get a replacement item. That’s great when needed, but after getting bad meat a second time, to me it just isn’t worth the hassle (our Aldi is about 15 minutes away).
I used to just jot down our meals on a piece of notebook paper with dates and meals listed on the right and my grocery list on the left. However, I always ended up forgetting something for a meal and I’d have to run to Walmart a couple times a week. I decided that was just not working so I sat down a figured out a better plan.
Now (because, like I mentioned, I am a nerd) I have a much more organized folder. I went to Walmart and bought a folder with pockets and brads (like these) and some loose leaf paper. I made of list of all the meals we eat and listed all the things I need for that recipe (enough for double, if you’re using it for dinner and lunch). Then, I put all our recipes in the brads of the folder. This way, I have a list of every meal we do and it’s easy to pick a meal and copy over the recipe to my grocery list.
I leave extra paper in the back pocket for my weekly lists and in the front pocket I have a “check every week” list. This is for things that we need that aren’t necessarily part of a recipe, but are things we use throughout the week or that I like to have on hand: sugar, flour, eggs, milk, fruit, butter, cereal, tea bags, etc.
This folder system has helped so much for not only keeping me organized at the store, but for ease of choosing meals. I included all our recipes and meals, even those that are more infrequent. This way, even though it took a bit of time to get it all written up, it saves me a ton of time in the long run.
This month, for the first time, I decided to try planning for the month rather than for the week. It actually worked really well. It ended up saving us a good bit of money, too, because buying meat in bulk is so much cheaper. At Walmart they have a 10 lb roll of beef for just under $20-that’s more than half off per pound!
For the monthly planning, I once again turned to Excel. I typed a list of 25 meals (not 25 different meals, there were a few repeats), then created my list from there. Next to each item, I put the amount I will be spending for each thing (I use Excel for this so that I can plug in a formula and let it total up my list for me so I’ll know my grocery total ahead of time and can make sure I’m not over budget). Then we get ready for one big monthly shopping trip. For the meat, I bought gallon freezer bags (I prefer Ziploc; you can get a bulk pack here) and I separate all the meat by meal. I put the correct amount of meat in each bag and then labeled the bag using a Sharpie with the name of the meal. All the meat that I’m not using that first week goes into the freezer and I just check the meal plan a couple days ahead of time so it can thaw in the fridge.
I only bought perishable things a week at a time (for example, potato soup requires a carton of half and half, but we weren’t having it until the third week of the month, so I didn’t buy it during the big shopping trip). I just check the list each week for a quick run for whatever is needed for the week. I have a dry erase board on my fridge and I keep the month’s meal plan on the left, and on the right are the things I need to grab during the quick trip. I have this one and it’s perfect because the marker attaches and I never have to worry about losing it!
This was our first month to do the monthly meal planning but I have to say, I was pleasantly surprised by how smoothly it went! We will definitely continue doing it this way. I thought having to do quick weekly trips would be a pain, but it’s so much better than having to do a full shopping trip each week, especially with a newborn. I can run out after the kids go to sleep and be back within 20 minutes. That also gives James some time to get in a quick game of Madden!
Implementing these two things has been critical to our debt freedom journey. In my opinion, they are the two most practical and effective tips you can follow to help get a handle on your finances. I hope you found this information helpful. Now just put them into practice!
I’d love to hear your feedback- do you use a budget now? What do you like or dislike about your current system? Do you meal plan? Do you prefer planning by the week or month?