Key to Significant Debt Reduction So Far
Making every dollar work for me.
I’ve said it before, I know I will say it again, and I can’t say it enough. Being aware of every dollar we take in and send out, every single dollar, has made an enormous difference in our financial lives. Understanding where and why we spend and what we spend on, and taking control of that instead of frittering aimlessly, has lead to more money being freed up for debt reduction than I ever imagined. It is a great feeling, rather empowering, actually.
Spend less than you earn is very important, of course, but we’d been doing that for over three years and still not making much progress. We were spending less than we earned, but how much less? Not much. I’m not sure exactly, because we never kept exact track. But from how much was left over when we started this focused budgeting, we couldn’t have been spending much less than we earned. The biggest problem was anytime I “felt” like we had “extra” money, I would “catch up” all the things I had been denying myself or the family. Not extravagant things by any means, but also not always necessary things. But now…. every dollar has a purpose. Every dollar has a job, assigned at the beginning of the month, and every dollar is working hard for me.
No more money slipping through the cracks on useless clutter!
Make every dollar work for you. Know that every dollar has a job, be it to provide (food, shelter, utilities), reduce (debt), grow (savings)… whatever it is, know each dollar’s purpose. You can find dollars you never knew you had. Tracking each dollar spent and earned makes it much harder to lose them without knowing it.
Track those dollars. Give them jobs. Make them work for you. It is a wonderful feeling. And I sleep better at night.
When the kids don’t wake me up at least. 
~J
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August 31st, 2007 at 7:20 pm
That is so important, and it’s something that I haven’t been very successful at doing. What do you use to track your income and expenses? A spreadsheet? A computer program? A pencil and paper?
I haven’t found anything I’m consistent about using yet. Hmmm. I feel a new challenge for myself coming on. Tracking every dollar in September….
August 31st, 2007 at 7:45 pm
I use PearBudget (pearbudget.com) which is a free tool you can download. It has really worked well for me in keeping track of expenses and also budgeting for them. Charlie, the creator, has stopped by the blog a few times too lol.
August 31st, 2007 at 8:46 pm
Thanks! I’ve never heard of that one before! Off to check it out!
August 31st, 2007 at 9:02 pm
It takes a little bit to figure out everything but I’ve found it very useful.
you can right click on cells and put a little note on them. i put notes in all the time
September 4th, 2007 at 8:39 am
Might have to check out Pear Budget. Downloaded a Trial of YNAB (You Need a Budget) last night too. I like my spreadsheet, but it lacks a few things I would like…
September 4th, 2007 at 10:06 am
YNAB has a free trial? I keep saying I am going to try that out but I want to try it before I buy it if you know what I mean. Must go check this out….
November 11th, 2007 at 7:47 pm
I loved your phrase “Every dollar has a job, assigned at the beginning of the month…”! That is the key for me, to decide in advance where all the money will go each month.
I use pen and paper to make up my budget, I put each bi-weekly paycheck into its own column, then subtract the bills out of each paycheck, plus $200 to cover my food, gasoline, and a few miscellaneous items each pay period. Every penny that is left is designated either for debt repayment, designated savings/investment, or “irregular savings” to cover surprises that come up during the month, plus insurance premiums. I live a simple life, so budgeting takes only a few minutes. But I can see how people with more complex lives would need a spreadsheet or other program to do this!
Next, I go to Quicken each payday and enter my paycheck and write a couple of checks, pay the rest online, and set up transfers for debt payment and savings. The money that is left is my $200 allowance ($100 per week) and that covers me until the next paycheck.
Assigning my savings and debt payments ahead of time has accelerated my debt payments and increased my savings quite a bit! I pay much less interest on my debt, and I am earning earning money on my savings and investments. But the biggest difference I have noticed is my peace of mind. I have a handle on my finances and it is very easy to see my progress!