Budgeting Part 5

At long last, we have made it to the final part. Using your sheet with all your debt, here's how we pay it off!

When you receive your paycheck every week, take your pay and subtract your expenses from it. For example: Say you make $425 and your weekly expenses (everything on your category sheet plus what you're putting in the Extra category) is $350. $425-$350=$75. You have $75 that hasn't been assigned anywhere. This number will probably change weekly, so be sure to calculate it with every check. Take this $75 and apply it towards the debt on the top of your sheet (the debt with the highest interest rate).

Also, at the end of each month (remember that fiscal month we talked about earlier), look at all of your monthly categories and see what you have leftover from the month. Take all of that money and add it to your debt as well. At the end of the fiscal year, do the same with yearly expenses.

You will continue this process until the top debt is paid off.

Once the top debt is paid off, take whatever you were paying on that debt (the minimum payment) and all other remaining money (extra from your paycheck + extra from monthly expenses) to the second debt. Once the second debt is paid off, take what you were paying on the first and second debt plus the remaining money and apply it towards the third. Continue with this until you are debt free! In the meantime, make sure you are paying the minimum payment on all other debts.

It is up to you, but I would suggest, before paying off any debts, to make sure you have an emergency fund in your savings. Take the $75 and apply it towards your savings until you reach your desired amount. Personally, $2000 keeps me comforted, but it depends on your own personal finances.

If you don't have any debt, (WHOOHOOO! That's great!), you can use this same procedure to save so that you won't need any debt in the future. As soon as our student loans are paid off we're going to set aside as much money as possible. I'd love to never have a mortgage or to have a very small one that is paid off quickly.

I'm sure this all seems very overwhelming at first. Just remember that hiding from debt and unknown expenses doesn't help anything it just puts off the inevitable and makes things worse.

If anything I have said is unclear, you think I may have said something incorrect, or anything else, feel free to ask and let me know!


"Which of you wishing to construct a tower does not first sit down and calculate the cost to see if there is enough for its completion? Otherwise, after laying the foundation and finding himself unable to finish the work the onlookers should laugh at him and say, 'This one began to build but did not have the resources to finish." Luke 14: 28-30