Debt-Busting Budget...That’s because we think in terms of payday…when deciding how to spend our...

Create a Debt-Busting Budget Copyright © 2019 Trea’s Two Cents, LLC

Create a Debt-Busting Budget The step-by-step system to create and stick to a realistic

budget that pays off 6-figure debt…with your current income


- Module 4 - How to stick to your budget (and recover from anything)


First, remember…(from module 3)

Creating a budget is only the beginning, in order to see progress we have to stick with it

Most budgets are tossed after a month because we don’t adjust them as life happens

A flexible budget helps us recover from whatever life throws our way

The right processes and tools keep our budget flexible, making it easy to track our spending, monitor progress, and adjust as needed

Action taken: you blocked time on your calendar each day, week, and month to follow the debt-busting budget process that will make you resilient on your debt-free journey (and

you started tracking your spending in the Debt-Busting Budget template)


In module 4, we’ll cover…

Why overspending is so easy, and how you can avoid it

The secret to sticking to your spending limits

How to set up your budget so you don’t overspend

Exactly how to recover from overspending when it happens

Take action: By the end of this module you’ll have a plan for each paycheck that helps you recover from anything!


Sticking to your budget is two fold:

If we’re going to stick to our budget, we have to: 1) Not overspend

2) Recover when we do overspend

Module 3 put in place a process that shows us where we we’re overspending, so we can recover quickly if it happens

Today, we’ll focus on how to overspend less, and how to recover when we do overspend


What do we mean by “overspending”

Overspending means going over your monthly spending limits (that you worked so hard on in module 2)

Overspending is so dangerous because it stops you from

consistently making your aggressive debt payments (and can lead to more debt if left unchecked!)


Why is it so easy to overspend?

Even the best budgets and trackers fall victim to overspending when our budgets don’t align with our pay periods

That’s because we think in terms of payday…when deciding how to spend our money we think about what we can afford until the next payday

Usually we get paid, pay our bills, and then the rest kind of does what it wants

Before our debt-busting budget, this was okay (not really)…but we now have pretty strict spending limits to follow if we want to consistently make our aggressive debt payments

and become debt-free as quickly as possible


The secret to sticking to your spending limits

The secret to sticking to your spending limits is having a detailed plan for each paycheck

This paycheck plan will show you everything your money should do until you get paid again, ensuring the appropriate amount goes toward bills, necessities, fun, and your aggressive debt payments

Because most of us don’t get paid monthly, we have to create a different view of our money that’s at our paycheck level (bi-weekly, weekly, etc.)

Monthly budgets are still super important…they serve the purpose of planning our money and tracking progress at a high level…but unless you get paid monthly, it’ll be hard to stick to a monthly budget in your day-to-day

Our spending plan must align to our paydays if we’re going to have the utmost control over our money and stick to even the toughest debt-busting budgets


What is a paycheck plan?

A paycheck plan highlights for each paycheck how much goes toward your bill, necessity, and fun spending…and most importantly, how much goes toward your aggressive debt

payments

Every time you get paid, you will know exactly how much should go where

This makes it super easy (almost second nature) to handle all of your business for the month and still consistently pay off your debt

It’s also the perfect tool to help you adjust and move money around when you overspend, or run into a spend emergency


What is a paycheck plan?


How to create a paycheck plan

We create a paycheck plan by spreading our monthly expenses across our paychecks

For example, if you get paid twice a month, one paycheck will cover approximately half of your bills, half of your necessities, half of your fun,

and half of your aggressive debt-free payment…and the other paycheck will cover the rest

If you get paid monthly, you don’t need a separate paycheck plan, because your monthly debt-busting budget covers it!


Create the paycheck plan - Bills

With each paycheck, we only want to pay for bills that are due before the next paycheck

For example, if your first paycheck of the month is June 1 and your second paycheck of the month is June 15, the June 1 paycheck should only cover those bills due before June 15.

The June 15 paycheck will cover all bills due before July 1, and so on…

The goal with the paycheck plan is to do the minimum to cover your bills so that you have as much left over to cover your necessities, fun, and aggressive debt payment (and avoid

overspending)


Getting ahead of bills can hurt you

You may be tempted to pay as many bills as you can with a given paycheck to get them out of the way

But for a given paycheck, that leaves you with less money to spend on necessities and fun

It actually increases your chances of overspending because most of your money went to bills when it didn’t have to!

Trust the spending limits you created in module 3 (remember, they allow you to pay your bills and spend on necessities and fun all while making big debt payments)

As important as it is to pay your bills, it’s just as important to have the dollars set aside for necessities and fun spending


Create the paycheck plan - Necessities

Ideally, we want to spread necessity spending equally across your paychecks

For example, if your budgeting $700 for necessities, we ideally want $350 to come from your June 1 paycheck and $350 to come from your June 15 paycheck

Depending on how your bills fall, this may not be possible…you may have all $700 of your necessity spending come from the June 1 paycheck (or you may need to call to change

the due dates of some bills)

Adjust and play with the numbers until you feel comfortable with your paycheck plan


Create the paycheck plan - Fun

Similar to necessity spending, we want to spread our fun spending equally across paychecks

For example, if you’re budgeting $200 for fun, we ideally want $100 to come from your June 1 paycheck and $100 to come from your June 15 paycheck

Depending on how your bills fall, this may not be possible…you may have all $200 of your fun spending come from the June 1 paycheck (or you may need to call to change the due

dates of some bills)

Adjust and play with the numbers until you feel comfortable with following that paycheck plan


Create the paycheck plan – Aggressive debt payments

It doesn’t matter if the aggressive debt payment is spread equally across your paychecks or bundled all into one, the key

is to push to make this happen every month

If your budgeting $200 as your aggressive debt payment, it can show up as all $200 from the June 1 paycheck, $100 from each paycheck…it doesn’t matter, as long your plan is realistic and

you feel comfortable following it


The zero-balanced budget

You’ll notice as you complete your Paycheck Plan that the amount left over for each paycheck is at or close to zero

This may leave you feeling nervous, like you’re living paycheck-to-paycheck with a zero cash flow, but remember…you’re only in a dangerous position if all of your money is going

toward expenses that don’t move you forward

Instead, we’re minimizing your expenses and putting as much as possible toward your debt…so you’re moving forward!

We’re just simply making a plan for every dollar to make sure your money does the most for you


Quickly recover from overspending


What do I do when I overspend?

Whenever you overspend or have a spending emergency you want to avoid two major things: 1) Avoid spending more money than you have (i.e. using credit cards, payday loans, etc.)

2) Avoid cutting into your aggressive debt payments

The goal is to adjust your spending across bills, necessities, and fun so that you never spend more than you make and you avoid cutting into your aggressive debt payments

Start with fun spending to see if you can cut back (this is the easiest to adjust quickly), if maxed out then move on to necessity spending, then bill spending (this is the toughest to adjust quickly).

If you still need more money to recover, tap into your aggressive debt payments as a last resort


Adjust your paycheck plan to protect your aggressive debt payments


What about bigger mistakes?

Follow the same process…you’ll have to make larger adjustments, but the paycheck plan still helps you see where you can pull

money from to recover

It’s not the end of the world if you have to pull from your aggressive debt payments

The key is to make it temporary and get back to your aggressive payment as quickly as you can


How the paycheck plan fits in the debt-busting budget process

Daily tracking: Track your spending with a manual budget app through the day and enter spending into Debt-Busting Budget template

Weekly check-in: Check your planned spending to your actual spending in the Debt-Busting Budget template and journal your progress and adjustments in the Weekly Accountability Journal

Each paycheck: Check your paycheck plan to see which bills should be paid and exactly how much should go toward necessities and fun and your aggressive debt payments until your next paycheck (and to incorporate any adjustments from your weekly and monthly check-ins)

Monthly planning: Check your planned spending to your actual spending in the Debt-Busting Budget template and journal your progress and adjustments (including upcoming less frequent expenses) in the Monthly Accountability Journal


Don’t just know where your money should go, put it there!

Keeping all of your money jumbled in one account can make it hard to keep track of what goes where and how much you have left across your spending categories

Physically separating your money makes it beyond easy to stick to your spending limits.

3 accounts are ideal (one for each major spending category), but you’ll at least want 2 accounts…at a minimum separate your fun and necessity spending from your bill spending

As your account gets closer to zero, you’ll pay more attention to your spending and decrease your chances of going over (plus it makes it a little hard to steal from another

category)


Module 4 recap

It’s too easy to overspend when our budget doesn’t align with our pay period (difficult to keep track of a monthly budget when we’re not paid monthly)

Instead we create a plan for our money at the paycheck level that shows where every dollar should go until we get paid again

Each time we get paid, we can check to see how much goes where, and can physically separate our money across different accounts to make sure we don’t overspend across

categories

The paycheck plan helps us recover from overspending and unexpected expenses by showing us where we can move money to protect our aggressive debt payments


Course wrap up! Here’s the great work you’ve done!

Learned your natural spending habits and made some major adjustments to maximize your cash flow

Created new spending limits that help you consistently make aggressive debt payments

Put in place your daily, weekly, and monthly processes to monitor your progress and show when you’re getting off track

Today: You’ll create your paycheck plan to show exactly where your money should go each paycheck and highlight how you can adjust (or move money around) when you

overspend


Let’s take action

Open your saved CADBB Break Free Template and complete the Module 4 tab

Enter the amount of each paycheck at the top of your paycheck plan (this is meant to be a monthly view, so if you get paid twice a month, you’ll need two paycheck plans, if you get paid weekly, you’ll need four)

Enter the details of each expense that each paycheck will cover in the “expense” section. Try to spread your expenses out evenly if you can

As you enter your expenses, pay attention to the “unassigned dollars” section. This amount should be zero for each paycheck because every dollar needs a home

Adjust the numbers until all of your spending is accounted for and all of your income is allocated

Debt-Busting Budget...That’s because we think in terms of payday…when deciding how to spend our...

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