How a simple family budget paid off $5000 of debt in 6 weeks (2024)

Do you have any idea how muchsetting up and keeping to a family budget can save you?

When I made those changes I began to notice a big, big difference.

Last year I was in up to my eyeballs in debt I was struggling living paycheck to paycheck, which was nothing short of depressing.Something had to change.

What did I do?

I set goals, pulled together a simple cash budget, stuck to it and boy, did it work!

I paid off a $5000 credit card in 6 weeks! It wasn’t easy but by followingthe steps I took and the lessons I learnt from some of the mistakes I made you can do this too.

If you want to pay off your debts or your mortgage fast or save for a holiday or an emergency fund then setting up a family budget is the really the first place you should start. It helps you see where your money is going and helps you plan for and monitor where you need it to go.

In this post, I’m going to detail how I did it, what benefit I saw from sticking to a cash budget, what you need to do to get your family budget up and running and give you some tips to sticking to it!

I’m always looking for ways to improve my budgeting so make sure to stay on the list so that I can tell you if I update the template or if I have more tips to give you. If you have any suggestions on how to improve the template or any other ideas on sticking to a budget please drop your thoughts in the comments to help me and others. I’d love to hear from you!

Related:

• What is a budget plan?
• How to make a budget planner
• Why a cost-cutting strategy helps you pay off debt quickly

Before you start on your family budget however here’s a really important step I recommend you take.

Set yourself some goals

I’m going to be straight up with you, living on a budget can be painful. I consider that I set myself a bit of an epic task given the situation I was in. Many times I was faced with decisions to buy things that I simply did not need but had previously taken for granted as a minor cost in my day to day life. When you starve yourself of simple things it can be painful and hard and takes a degree of determination and will power.

We all want to treat ourselves at times and being stringent with yourself means those short-lived moments of joy that take their toll on your pocket are going to have to go.

You’re going to need some motivation to help you stick to your budget. To give yourself a fighting chance of finding the strength to walking away from those moments of temptations you need a counter-balance.

You need a goal.

Break up your goal into bite-size pieces

Last year my goal was to pay off $5000 of credit card debt by my birthday. My birthday is early March. It was a tough achievement for me. Achievable, but tough.

If you’re looking at a larger goal, like paying off a hefty mortgage I strongly suggest you break up your goal into manageable chunks over a period of time.

Why would you do that?

Because breaking that large goal into smaller chunks helps reduce that monolithic stretch that you’re unlikely to reach in one go into something far more achievable.

If you set yourself a goal to pay off your 30-year mortgage in just 15 years then you’re unlikely to find the short term motivation you’ll need to keep at it. You’re human at the end of the day.

Setting yourself up for an epic goal without breaking it down into achievable chunks is setting yourself up for failure.

But here is one of my first big tips.

Don’t break the chunks down into monthly amounts; you want to push yourself.

For example, if you have a goal that needs to be achieved in a year or more then break that up into quarterly goals. By doing this you’ll start to feel like you’re getting somewhere once you hit one of those quarterly milestones.

Now it’s great to have set a quarterly goal, but running life on a budget may feel like a bit of a marathon sometimes, especially with an epic goal like paying off a huge loan or saving for a dream holiday. So once you’ve broken it down into more meaningful chunks you’re going to need to factor in some motivation for yourself, because like I said you’re only human.

Set yourself a small reward at the end of each goal.

Consider these little rewards to be like stopping for a drink of water or some nutrition for your soul during your marathon.

My goal was to have a night out with friends for my birthday. I knew that if I could reach my birthday and have paid my credit card off I’d really feel proud of myself and I could kick back and have a beer and not feel guilty.

It meant all the more that I decided to cut out my entertainment budget in its entirety for 3 months.

Your reward could be a meal with your partner, a trip to the movies, a pizza night or maybe even a toy for your child if that brings you some happiness.

It’s your reward, you decide what it is and it all depends on your financial circ*mstance and the importance of your end game goal.

But remember, these are little rewards for along the way, they need to be financially tight to help you work toward your main goal but enough to give yourself a pat on the back.

If you’re working to pay off a credit card over 12 months don’t factor in a blow out shopping trip every 3 months, that’s only going to set you back.

You want a small sensible reward that makes you feel good but for as little cost as you can. This year I’m going to factor in a small entertainment budget to be used with my son and my lady. I’m going to be stringent with myself to not allow myself to unlock that cash unless I achieve my quarterly goal.

You must keep your focus on the end game.

Start formulating your family budget

Once you’ve set your goal you’re ready to set up your family budget. Now I strongly recommend you break this up into weekly columns and you populate these on the same day every week, even if you get paid fortnightly or monthly.

I get paid fortnightly, a few years back I used to get paid monthly. I tried budgeting back then and found it much harder to maintain a budget when I tried to plan on a monthly basis.

The benefits to keeping to a weekly budget

1. It’s much easier to tally up your spend on a week to week basis – there are just fewer figures to handle on a weekly basis. It takes me about 10 – 20 minutes. I used to do it every Sunday night before the working week started.
2. It keeps you motivated in the short term – every Sunday night I’d see how I’d spent and push myself a little harder to do better. Plus it kept my goal in mind every week so when I was in a position where I’d want to spend on something I hadn’t budgeted for I found myself more capable of walking away.
3. It’s so much easier to live on a weekly budget – when you find it hard and you’re on day 4 of the week you know you’ve just got 3 days left before you unlock next week’s money. If you set yourself on a super tight budget like I did I guarantee you’ll run out of money before the weekends. A few days is easier to get through than half a month or a week and a half. You’ll find yourself saying, I’ve got no cash to buy any extra groceries but there are just two days to go, stick it out.

How the family budget is set out

If you’ve signed up for the mailing list and received a copy of my cash flow budget then you’ll see I have a top section for my income and then a bottom section for my expenses.

I itemize my income so I have a row for my salary and I have rental income from a property. If you find you have a shortfall or you’re looking for extra income to aid your cash flow then you can add extra rows for things like baby or pet sitting or any other ways you can think to make extra money.

As for my expenses, I break these down into the categories that I want to view. I have my utility bills, groceries, clothes, entertainment, bank fees and tax.

From here you can break these into subcategories below each item if you wish. Just create a new row below each category.

I wanted to track my grocery spend on food and then household items like cleaning products. I did this so that I could see where I could get some more savings. Bank fees and charges were also an item I wanted to track more closely. It’s important to keep a track on what you’re paying the banks on interest vs fees.

Once I had this set up, I was able to see how much I was spending on account fees. Seeing this information resulted in me making a decision to switch banks to get a better deal.

Seeing the amount of interest I was paying on debt was also an important factor in making changes to my bank. And, just as importantly it was motivating to see how much the interest I was paying was reducing as I paid off my credit card.

This was a huge motivation in itself as I went from paying about $65 in the first month to $30 in the second so I considered I’d put $35 back in my pocket in a roundabout way.

Set your budget starting a few months ago

When you begin your budget start with a few months prior to when you want to start. So you’re going to plug in the previous month’s figures into the cash flow sheet. If possible do the previous three months.

For example, I started in January but I completed October, November, and December for the previous year.

This will help you get an average of what you are spending your money on each month and you can see a pattern of spending, whether it’s that daily coffee or your monthly electric bill, you’ll be able to see the average spend on those items each week.

When I did this I was really surprised. I was spending $50 a week on coffee and $50 a week on lunches as well as $150 a week on groceries and household items.

A really useful tip is to create an average figure for your week on week spend using the average function in your spreadsheet to help you forecast.

Go one step further see what this average spend looks like each year. Seeing that I was spending around $2500 a year on coffee was a shocker for me! That was half my credit card bill right there. The other half was in lunches. If I had a time frame of 12 months I could stop those two things and have it paid down no problem.

It’s doing this that will help you see what you can maybe live without and what effect it will have on your goal.

It’ll also help you view the problem from a different perspective.

Say for example I wanted to save $20,000 in 12 months. Well, I’ve just figured out how to save $5,000. I could take a look at my utility bills and consider if I could reduce those costs by $100 a week to get another $5,000. Maybe reduce transport costs by carpooling or hitching a ride with the better half to save another $5,000 and then reduce my entertainment expenses for the rest.

A family budget helps you see where your money is going, so you can see where you want your money to go!

Seeing the figures like this will help you figure what you need to do to get there.

Keep your family budget simple

What do I mean by this?

Well, here’s the big issue I originally had when I started my family budget.

When I first started it used to take a little too long to plug in my actual weekly figures. I realised this was because I had multiple accounts across multiple banks and it was a pain to pull them all together.

My pro tip in this regard is to use just ONE bank account for your spending. If you have a partner, use the same account if you can.

This makes it easier to iterate and categorise your transactions each week and get a total for inputting into each row of your family budget and will save you needing to jump around accounts for all those figures.

To force yourself into doing this put all cash and creditcards for other accounts into a lock-box and leave it at home. If you’re really serious, leave all your cards at home. There’s a big upside to doing that as well. It makes you think about what you need to spend when you are out – you’ll soon learn that when you want to buy something and don’t have any money.

Have you ever forgotten you cash card and gone to work and been unable to buy yourself lunch? You don’t forget your card the next day do you? Well, this is a similar upside, except the next day think about making yourself a lunch to save your money, perhaps even grab the leftovers from last night from out of your fridge!

Not having your cardsforces you towalk away from the unnecessary spending.

Set a time to complete the figures each week

As I’ve mentioned, I set down some time each week on a Sunday. I started with 30 minutes but soon got quicker primarily because I started to use one bank account.

However, I also noticed there were far fewer transactions as time went by. This was because I was becoming far more aware of my spending and, well, not spending.

The effect of this was motivation in and of itself as I began to see that I was doing really well. I’d have cash left over each week which I did not expect. Granted, I was living a little too tight and I consider I could not have maintained the way I was living for longer than 6 months, but I had a short term goal and it was a short-term pain worth putting up with.

As this happened I’d have more money to pay off my card which in turn reduce interest payments that I’d budgeted for and this got me to my goal faster.

Much faster.

I had about 9 weeks to achieve my goal. By keeping to my budget religiously and in most cases going beyond that, with massively frugal savings, I paid off my card in just 6 weeks!

I managed to pay off my card in just 6 weeks in combination with this counter-intuitive technique that should solely be used for paying off credit card debt. It’s super effective, but only for the strong-willed.

Start your budget today

If you’re paying off debt, or just saving for something important to you and you family, the essential ingredient for success starts with a budget.

If you want a copy of my weekly budget planner you’ll get if for free if you sign up to my mailing list below.

I hope you’ll subscribe and continue to follow along with my journey, it’s going to be exciting!