Stop Using a Credit Card, Write A Budget

by Ryan Yates

As you’ve seen in the previous sections of  the Debt Elimination series, you must have a plan to get out of the credit card habit.  Changes do not just happen, actions must be taken to get the desired results.

If you haven’t already read the following posts, you may want to take a few minutes to catch up on this topic.  These articles provide the first steps required to begin your debt free journey.

In this post we’ll talk about the benefits of writing and using a budget.

  • On Paper, On Purpose
  • Accountability
  • Less Stress
  • A Road Map

On Paper On Purpose

The phrase on paper on purpose is my favorite Dave Ramsey line.  On paper on purpose simply means if something is important to complete, you’d need to write it down.  Our brains can fool us into thinking things are fine, even though our financial world is collapsing.  While living in denial, our brains just keep reminding us everything is ok.  The first step in any recovery program is usually the most difficult, admitting you have a problem.  A written budget will show you if you in fact have a problem.  If you do, then you need to fix it.  If you don’t, good for you but you still need a solid financial plan.  Using a budget worksheet is a great way to start capturing current expenses and to begin customizing a budget that will destroy your debt.  How to budget is a great resource to check out for setting a budget.

When you are dealing with money, you can’t rely on your brain to always provide sound advice.  Your emotions come into play and they can derail any good money habits you have been working to adopt.  Using a written budget to list  the ways you are allowed to spend your money will take away the emotions.  Having a written budget will also place you and your spouse/partner on an equal playing field.  The two of you will know where, when, and how your money is being spent.  I like to refer to my budget as our normalizer.  It allows my wife and I to completely understand the ins and outs of our money so neither person has an inflated view of our finances.  It was the single most important step that we’ve taken to understand our finances and how each of us react to them.


Having to review your finances can drive home the fact that you need to make smart decisions with your money.  Having the discipline to follow the budget  is the hard part.  People do not like to be controlled, and living on a budgets make many people feel this way.  But once you see how a budget can help you save money, you’ll love the concept.

When drafting a budget you need to take into account all the possible ways money runs out of your fingers.  Weekly groceries, utility bills, credit card bills, mortgage payments, the kids birthday party, the house insurance, and every other expense you can think of.  Always remember that even though an expense doesn’t accrue every week or month, you still need to account for it.  The best examples of these would be Christmas, or the property taxes you pay.  You need to set up a sinking fund to account for these expense so you have the money when it’s required.

Another powerful benefit from creating and using a budget is it’s ability to stop your excuses.  You can no longer say that you didn’t know  the checking account balance was low.  You can no longing stop at a fast food joint for a burger and not account for the spending.  You can no longer over spend on clothing when you know you only have $100 to spend.  Using a budget sets your limits and holds you to them.  You have to account for all your spending to the budget and to your spouse, both of which are great motivators.

Less Stress

Have you ever lost sleep over money issues?  Accounting for all expenses in a budget will provide you piece of mind.  Instead of having a disorganized approach to money where you can miss a payment, a budget will keep you on the straight and narrow.  Imagine having a tool that will keep all of your finances in one spot, that’s a budget.  No more stressing whether you have the money at the end of the month to write a check to pay the gas bill.  You’ve already written the check and balanced your accounts because you have your finances under control.  After working and living on a budget for a month or two you’ll see a huge reduction in stress, then you’ll wonder how you lasted so long without one.

A Road Map

The biggest advantage of a budget is its ability to help guide you to your goals.  Learning to live beneath your means while not adding to any debts will produce a surplus of money.  The budget is the tool that you use to grow the surplus.  As you continue to understand your budget and how the money flows into and out of your life, you’ll be able to make better decisions.  You can use the surplus to build an emergency fund, to save for retirement, to pay off debt, and any number of other wealth building items.

The surplus is completely controlled by you and you choose how to use it every month.  If you are saving for a down payment on a house and you need $20,000 in the next year, the budget is the place to start.  Take the current surplus of $1,000 per month to start the calculation.  $1,000 times 12 months will only get you $12,000.  You need to review the budget so see what else can be eliminated to reach your goal.  You would need an extra $667 per month to reach the $20,000 goal.  Cutting back $100 a month on groceries, $200 on entertainment, $100 on heating/air conditioning, $67 on gas, $50 on cable channels, $100 on cloths, and $50 on blow money will get you there.  If that is too much to cut, then you need to extend the time frame or get more income.  Using a budget like this is a great way to plan for the future.  Of course surprises are going to come up, but it is the best way to navigate to your goals.


OdysseusToday May 12, 2010 at

I find the most important section of this article in my personal finances is the Accountability section. While I have never set to stone “I will only send $300 on groceries this month” I do update my excel sheets about twice a week so I know after the first week, second week, third, etc… exactly where my month is ending up. If we get to the last week and we have spent way to much I will tell my wife we are eating down the pantry… Cans of green beans and salt and pepper come out!

Great post!
.-= OdysseusToday´s last blog ..How to pick a Graduation Gift =-.

Jeffrey Kosola May 13, 2010 at

@Odysseus I like the idea of “eating down the pantry” We DO set in stone how much we pay for groceries. We spend $400 per month or $100 per week. That has been feeding my family of 4 for the past 6 month with out an issue. We keep the pantry stocked with simple dinners if we run out of money near the end of the week. We use a cash envelope system for our groceries and it works great. $200 is put into it every paycheck. If the first week we need to spend $120 then we can only spend $80 the next week. The really drives our accontabilty!!

Kyle C. May 12, 2010 at

The biggest point you make here is on accountability. The more you are forced to review your spending the more you are going to start to see the leaks and plug them up. It is a powerful thing just to write down where all of your money goes. When you stat to see 300-400 per month going to eating out you start to realize there is a ton of room for improvement.
.-= Kyle C.´s last blog ..Holy Crap, I Suck… Or Not =-.

Jeffrey Kosola May 13, 2010 at

@Kyle Plugging the leaks, I love it. That is exactly the approach and mind set needed to drive accountability. Oh, by the way – You don’t suck. Personal finance is personal and rationally thinking about purchases and how they relate to your personal situation is the only way to do it. Good luck with your gas bill this summer Brother 🙂

MFO May 12, 2010 at

Excellent points. I really liked the idea of your on paper point. I totally agree with you that if you invest the time and energy to “put it down on paper” that you will be much more likely to follow through with it. That is probably partially why I, like so many others, always have lists of things to do, lists of idea for my blog, lists for movies to rent, and lists of songs I like. Of course it’s also because you simply cannot remember all of those things – but still, putting things down on paper I can definitely see helping!

Also, I agree with you 100% on the less stress. There was a time when I was so strapped for cash, that it really was affecting my sleep. Even during the day it was CONSTATLY looming over my head, I could not escape this feeling of “crap I have to ask my parents for some cash, or if my friends can help on my rent”…Getting a hold of my finances, INCLUDING a much better financial management approach to life (my version of a budget), really helped with my peace of mind.

Finally the Road Map bit is so true. What better way to realize your goals then to PLAN for them. This is the definition of a budget, financial planning!

Jeffrey Kosola May 13, 2010 at

@MFO Getting it on paper and out of your head helps to clearify your situation, while releaving stress at the same time. I was so sick of stressing over my debt, I finally decided to fix it. Of course writting about on the blog helps to releave stress as well 🙂

Jeff @ sustainablelifeblog May 12, 2010 at

This has been a great series so far. It’s provided many helpful tips on how to budget and why you need one, but the part that resonated with me most has been the sleeping through the night part. I’ve had grips on my finances for a while, but it seemed like every time I’d get a bit of money saved up, something would go wrong with my car, and I sure lost lots of sleep worrying about the car starting on cold mornings, and then what I would do if the car wouldnt start one cold morning, because I didnt have the cash to replace it.
Unfortunately I had to take out a loan, but I’ve got that on an early repayment plan and I sure sleep better at night these days.

I also think the part about having a roadmap is under stated as well. Having something to work towards (house, nice vacation paid in cash, debt free, car paid in cash, etc) will make the toiling of setting up (and failing) your first few months budgets until you get it right.
.-= Jeff @ sustainablelifeblog´s last blog ..Sustainabilty Video =-.

Jeffrey Kosola May 13, 2010 at

@Jeff Those damn cars are so nice and so bad at the same time. I believe car related “emergencies” are the most common emergency that derails people’s financial plans. Do you use and emergency fund to handle the “crazy” expenses that pop up? Or do you utilize a “Car Maintanence” fund to pay for car issues? I’m guess it won’t impact you too much for while with a differenct car, but it’s something to think about in the long run.

Yep, focusing on a goal will really help someone get through those first few failures of budgeting.

Forest May 12, 2010 at

I’m reading Total Money Makeover right now and Ramsey as self assured and mildly annoying as he sometimes seems only seems to give solid advice…. writing stuff down is very important.

I am not using ANY credit anymore, it’s my long term plan to never open another loan or CC…. Still have the ones in my Debt Management Plan to pay off but when they are gone, they are gone 🙂
.-= Forest´s last blog ..Bartering Websites and Finding a Local Barter Network =-.

Jeffrey Kosola May 13, 2010 at

@Forest I personally love Ramsey, even with all his quarks. I focus on his message and processes. I’m not a very religious person so I dismiss that part of his teachings. It’s the basic principles that continue to intrigue me. It’s sooo simple to build wealth and remain debt free, but our culture and behaviors keep us making the same mistakes over and over again. I’ve just helped someone here at my J.O.B. number 1 to begin following Ramsey. They are amazed at their progess already 🙂

Forest May 14, 2010 at

Yes I agree…. his advice is nothing but good and it’s well worth passing the book around. That’s why I sponsored a copy for Rainy Day Saver’s contest, thought it could come in useful for someone.
.-= Forest´s last blog ..Does A Minimalist Lifestyle Breed Laziness? =-.

Money Smarts May 13, 2010 at

Writing our budget down, and using a cash envelope system was key for getting us to a point where we weren’t overspending, especially on categories like eating out and groceries – where it can be easy to overspend hundreds of dollars if you’re not careful!
.-= Money Smarts´s last blog ..Dave Ramsey’s 7 Baby Steps To Getting Out Of Debt =-.

FinEngr May 18, 2010 at

The roadmap is the most critical part. You can create a budget, save a surplus, but if you’re not sure where you’re going – you could end up in the same scenario.

Sort of like taking a trip. You have your destination, then back-calculate how many miles it is, and how much gas you need. If you just start driving, even with a surplus of gas, you’ll eventually run out if you’re not headed to some specific destination. I bet you can expand on that given the delivery experiences!

**BTW – really like Newton’s bling 🙂
.-= FinEngr´s last blog ..Don’t Be Fooled by Sneaky Labeling! =-.

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