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Home / Debt / 3 Steps To Eliminating All Of Your Debt, Part 2: Plan


Debt AttackThis is Part 2 in our 3-Part Series:  Eliminating All of Your Debt.  Here is the link to Part 1:  Prepare

After accumulating three months of solid data on where your money is going and finding ways to cutback, it is time to formulate a plan of attack that will allow you to pay off your debts. In this step you will learn how to create a basic budget to keep yourself on track as well as a few tips on how to attack that mountain of debt.

Before The Budget

Budgeting is all about getting your bills paid and saving money. It is also about getting your bills paid on time, so a key factor to have in mind is the due date of every bill. While paying down your debt is great, if you make your payments late, your credit score is still going to suffer. As you form your budget, note the due date next to each item. Many online tools will offer you alerts to remind you as well and you can set an alert on the most basic of cell phones.

What Is In A Budget?

Your budget will need to become a pivotal piece of your future. The hardest part is knowing what you should include. Unfortunately, you need to include everything, leaving nothing to chance. Your budget will be both solid and fluid at the same time. Here are the solid parts that need to be included:

  • Rent/Mortgage
  • Utilities
  • Cable
  • Phone
  • Loan payments
  • Credit card (minimum payment only for now)
  • Fuel
  • Food (including a reasonable amount for food while working)
  • Fun (a monthly date night or night out with your friends)

The fluid components will be:

  • Savings
  • Fun (vacation, etc)
  • Car maintenance/repairs
  • Home maintenance

These are basic items to include. You may have additional items like medical bills or tuition payments that you will need to account for. Be sure to have your spending records on hand as you get your budget roughed out. I like to use a pencil and piece of paper, but there are plenty of smartphone apps and online tools. seems to have a very comprehensive program that is easy to use and you can connect it to your smartphone.

Accounting For The Fluid

The items listed as being fluid still need to be incorporated into your budget. They are fluid because they can be raised or lowered depending on your income each pay period and will change each year. Start by setting a goal for each item. For example, you may want to save $500 this year, know that you will change your oil four times this year, need new tires, and want to go on a vacation. How do you include all of this into your budget? Break it down and put all of the money into a savings account. The items listed above roughly add up to $1,600(500 for savings, 500 for a vacation, 128 for oil changes, and 450 for tires, and 2 bucks to round it off). That is quite a bit of money, but reasonable if you plan for it. To arrive at that number, you will need to save $33.34 per week. Now that you have a solid number, place savings…$33.34 on your list of ”solid” budget items. Every year this number will change with your needs. Having these items incorporated into your budget ahead of time will head off most nasty budget-breaking surprises.

Debt Attack

Once you have your budget set and have worked it for a couple of months, it is time to tweak it a little. It is time for a plan of attack that allows you to pay off your debt. For this step you will need a list of all of your installment lines of credit;i.e, credit card payments, car loans, mortgage, loans for furniture, everything. The list should include the current balance and interest rate. Now, it is time for a personal choice. Do you have a low balance item that you want to get rid of quick or would you rather lower the balance on a high interest account? Each has its advantages, but you have to make a choice based on your personal preferences.

Now that you have made your choice, it is time to attack that debt. Tips for how you should go about that are in the third step: execution. Here is a link to that post. Good luck creating your budget.


About the author: Jerry Coffey


Jerry Coffey spent many years in a debt-riddled gray area somewhere between broke and desperately broke. His seemingly endless need for more and more cash led him to payday loans, repossessions, bankruptcy, and depression. After years of the same financial style, he heard a piece of advice that inspired him to find a way to change. The advice: ''The very definition of a fool is someone who continues to do the same things, but expects different results.'' This led him to a much more frugal lifestyle that sees all of his bills paid on time and a growing savings account. Even the seed of a retirement account has begun to sprout.


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