Make a Monthly Debt Budget: Rule 3

This is Rule 3 in my 10 Rules to End Your Debt and Change Your Life.

Now that you have mastered Rule 2 and dedicated a month to spending less than you earn and tracking every expense, it’s time to make a monthly debt and bills budget and live by it.

The purpose of Rule 2 was to give us some information to work with (as well as training you to live on less than you earn), and will work hand-in-hand with this Rule as we move towards our debt payoff in Rule 4.

Some of you may be wondering what the point of this step is. You might think that this is too basic or too obvious. But I’ve spent many years listening to people on radio shows who don’t know their own debt picture and don’t have a solid “homepage” for their debt.

They don’t know exactly how much they owe, and are dependent on the bills coming in the mail. They sometimes miss payments because they misplace a bill or thought that the other spouse had taken care of it.

Think of our monthly debt budget as a homepage for our debt freedom efforts.

Though it is something obvious and easy, that’s what makes it important to me. My debt budget spreadsheet focused me on my task and kept me on track each month. I never missed a payment once I implemented it.

So What Does Our Debt Budget Spreadsheet Do?

Having a debt and bill tracking spreadsheet does three things:

  • Compiles all your bill and debt expenses in one place
  • Gives you a place to keep track of what has been paid, and what needs to be paid
  • Tracks your progress as we work towards debt freedom

To best illustrate this step, I’m going to use a fictional example of the Jones Family. We will see what their debt budget looks like, and how you can build one yourself using Microsoft Excel or Google Docs Spreadsheet.

For these examples we will be using the MS Excel Spreadsheet I designed for my own use, and used for the last 8 years. As always, if you want a FREE copy of this spreadsheet, email me through the Contact Page on the left side of your screen and I’ll email you one right away.

So let’s look at our spreadsheet from a macro view, then we will examine all the sub-areas individually.

Debt Tracking Budget

Click to enlarge. This is my debt and bill spreadsheet with embedded instructions for use.


On first glance you can see that it lists all your monthly bills, as well as your monthly debts (in the blue and green areas). This is done on the left side of the spreadsheet. These areas also keep our bill due date, interest rates, minimum payments due, interest rates and finance charges: basically all the important stats about our bills and debts.

Debt Budget


On the far right side of the chart you will have a running total for the year, which is nice when you get to December and you can see how much you spend each year on things you choose to spend money on.

Beginning in the white area near the middle, you can see each vertical column is a month, and each cell in that month corresponds to one of your debts or bills across the horizontal rows. After you make a payment towards a bill or debt, it is immediately entered in its cell and you know it’s taken care of.

Starting at Row 17, you can see your running monthly totals. I have put formulas in my chart so that you don’t have to do math; the totals are automatically updated for you as you make more payments.

Near the bottom of the chart, starting at row 26, is your big picture totals for the month. Here we have your total Non-bill spending (which is your discretionary spending: groceries, entertainment, gasoline, and any other unexpected expense that didn’t make the chart). This cell is linked to Sheet 2 on the chart, which is where you enter your receipts and spending records for every transaction you make.


We also have places for you to see your Total Spending (all bills, debt payments, and discretionary spending), your Take Home Pay, and how your spending reconciles with your income (whether you went over or were under, and by how much). There is also a cell for the total amount of debt you paid off for the entire month (if you rent, you will have to adjust this formula so it doesn’t count your rent payment as debt payoff).

Let’s take a quick look at Sheet 2, labeled Monthly Spending. In here we are simply logging each receipt we get, the date, and what it was for. I don’t go crazy here and I don’t advise you do either (unless you want to). This means I’m not breaking down each receipt to Target into subcategories like clothes, food, toiletries, etc.

If you do this, you’ll probably be overwhelmed with data and tracking.

Debt Budget

Are You Keeping Up with the Joneses?

Now back to our hypothetical Jones family. What can we learn about them based on the numbers in our example chart? We can see that they have a decent monthly income, but we can also see that they have a decent amount of consumer debt. Between their credit cards, student loans and a personal loan, they owe about $45,000 (not counting their mortgage).

We can also see from their discretionary spending that they did a good job spending less than they earned, which allowed them to put an extra $650 this month towards their consumer debts. Notice that it was applied to their credit card with the smallest balance (more to come on this in the next Rule).

The Joneses also had about $237 left over at the end of the month. What they do with this money, and what you do with your surplus, is up to you. If you don’t have a solid emergency fund, put it there. If you have a good emergency stockpile of money, put it towards the smallest consumer debt as an extra principal payment at the end of the month.

To Recap

As I mentioned earlier, having a debt and bill budget allows us to compile all our bill and debt expenses in one place, gives us a place to keep track of what has been paid, and what needs to be paid, and tracks our progress as we work towards debt freedom.

Gone are the days when we are late on payments simply because an envelope fell into the gap between seats in your car. Ahead are the days when we can execute our debt freedom plans with confidence and the information we need to make debt freedom a reality.


Goal 1: Compile all your bills, debts and expenses and get them entered into your chart.

Goal 2: Don’t miss any payments and continue to spend less than you earn.


10 Rules to Eliminate Your Debt and Change Your Life

1. Combine Incomes, Finances and Efforts 

2. Spend Less than You Earn

3. Make a Monthly Debt Budget and Live by It 

4. Pay Off Debts Smallest to Largest, Regardless of Interest Rates

5. Make Big Changes for Big Results 

6. If You Don’t Need It, Sell It 

7. Save Monthly for Large, Anticipated Expenses

8. Set Aside Some Money for Fun

9. Pay Off Debts Before Investing 

10. The Goal of Work is Retirement 

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  1. I think that if you can get the basics down (budgeting, saving and paying down debt regularly, finding leaks in your spending habits) you are well on your way to a very solid plan and financial future. Take every other professional pursuit as an example…the key to excellence is a focus on getting the basics 100% right. Once you have that in place you are better off than 99% of the general population.

    • Thank MI for stopping by. Get the basics right, then scale it up. Works in business and personal finance.

  2. A monthly debt budget is a great idea and not something I’ve entertained. As soon as I find a permanent job and, therefore, have a permanent and stable income, I can start doing this.

    • Good to see you, Daisy! This helped me organize the chaos of my debts and get me focused. Thanks for reading.

  3. Wow I love how detailed you are with your spreadsheets. I need to do this as well.

  4. Your spreadsheet looks a bit too overwhelming, especially for someone who may never have budgeted before. I like to start out very simple, starting with expense categories, due date, and amount paid. Although my budget spreadsheet now is just as overwhelming as yours, it started out very simple and as I got more familiar with it, it just naturally evolved with more categories and such.

    • Thanks for weighing in. The one I use now has morphed into a Beautiful Mind flow chart with graphs, etc. I intended this to be a homepage, so it has all the important data.

      A simple list written in a notebook will work too, but this does all the math for you. It is fully customizable for everyone’s individual needs.

  5. that spreadsheet is wicked awesome, dude..

    i usually just use the budget features on, because they update automatically.

    • Thanks. Yeah, I started using it about 8 years ago before Mint and other cool online-based financial homepages started popping up. Guess I’m old fashioned, but it worked for me.

      Thanks for stopping by!

  6. I filled out the spreadsheet you sent me last week and WOW I think it is already helping. Once you see all those numbers in the same place you quickly realize where you need to make changes! Thanks for sharing all your valuable information.

    • Thanks Ashley for letting me know it is working out for you. This is the type of feedback that makes all the hours I put in on this site worth it.

      As always, if I can ever answer any questions, please don’t hesitate to email.

  7. Very nice indeed! I also use excel as well as it’s completely free to be customized. Your spreadsheets are excellent. Form here you can start modeling different future scenarios.

    • Definitely. I use mine to see where I’ll be in 6 months. Very handy as I have some large expenses coming up. Thanks for reading!

  8. I have a really simple spreadsheet. In fact all I list is total balance, payment amount and minimum payments. Then I I set myself a total goal what I want my debt balance to be at the end of the month, and I shoot for it. Sometimes it is hard, but sometimes it is so rewarding to see the total balance go down.

    • I still have the original versions of the spreadsheet I used in 2004. Funny to see how they started out simple and became more complex as the years went along. Thanks for stopping by Aloysa!

  9. John, Good work with the spreadsheet. Budget is the key to get your financial house in order.

    • Thanks Shilpan for stopping by! It did take a while to create this version for public distribution, but it’s worth it because some people have asked for it.

  10. Neat stuff. You may have motivated me to change up our own spreadsheet.

  11. Glad to hear I’m not the only one who uses one. Do you track your investments with it too, or just use your brokerage accounts for that?

  12. While we were paying down our $25,000 in debt (paid off September 2010-hurray!!), tracking the progress was the funnest part. It really motivates you and (hopefully) gives you a reason to smile through the sacrifices.

    • I can’t wait to join you soon in debt freedom. Even when it seems like the needle is not moving, at least you can stare at the chart. Thanks for visiting!

  13. I love spreadsheets, and these are no exceptions. This one is going in my next round up.

  14. I’m continuing to just fall in love with this series! I’ve used a spreadsheet in the past too, but fell away from it in the past year or so. I never included a “limit” column, though - I think that’s a must have, and wish I’d thought of it!

    • Thanks Elizabeth! I’m enjoying laying out the 10 Rules series each week. They have been getting a good response.

  15. I love your spreadsheet! However, I keep a very simple record and just mark what the new balance is and compare it to last month’s balance. Then I add up how much the overall debt went down and calculate what percentage down our debt is.

    • Thanks! You should see my personal one. I’ve added graphs and charts. I guess that’s because I’m a personal finance nerd.

  16. Great spreadsheet! My budget spreadsheet is definitely not as detailed as yours - makes me feel it’s time to update mine! :)

    • Maybe so. Each year I add some new features to my chart. It looks like something from a mad scientist’s master plan at this point. Thanks for stopping by!

  17. I need to go over your 10 rules. At the moment I don’t even know where to start in terms of personal budgeting. When I look at your spread sheet I feel anxious and kind of frustrated… It seem so complicated! I guess the only way to go is to make first step.. read your 10 rules series ))

    • Yes, it can be pretty daunting to make such big changes. The spreadsheet does look complicated at first, but once you have all your info in one document, it actually becomes easier than dealing with a pile of bills and wondering if you have everything. If you have any questions please don’t hesitate to contact me.

  18. Your spreadsheet is definitely a work of art. Great for taking and adapting to individual needs. Mine is way less detailed because I don’t want to spend the time to track in such detail, but this is useful for a lot of people and a great starting point (can always remove things).

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