How to Get on a Budget & Reduce Credit Card Debt

Paying down credit card debt first requires establishing a budget.

Paying down credit card debt first requires establishing a budget.

When moving in together, making a budget is a first step to adapting to each other’s spending habits. Budgeting is beneficial, even for couples that keep finances separate, as it helps ensure that there’s enough money to live out your dreams together. Prioritize paying off your existing credit card debt; the average credit card holder pays a 14.5 percent APR on balances -- a good seven points more than the average car loan.

Items you will need

  • Spreadsheet program or calculator and paper
  • Bank and credit card statements for the last 12 months

Build your spreadsheet. On a piece of paper or in a computer spreadsheet, list the following categories in the first column, leaving ample space under each to list specific items: Income, Fixed Expenses, and Variable Expenses. Then, starting in the second column at the top, type in headings across 12 columns for each month of the year, beginning with the current month.

Determine your fixed expenses and list these expenses under "Fixed Expenses," recording the amounts you anticipate in each monthly column. Fixed expenses are those that usually do not change over time. Examples are rent, insurance, and gym membership dues.

Estimate your variable expenses. Variable expenses are those that change each month depending on your habits. Groceries, clothing, and entertainment are examples. List each category under the Variable Expenses category. Use the past 12 months to estimate the monthly average for the next 12 months. Keep in mind that some expenses may be higher in certain months of the year. Be as accurate as possible.

Reduce expenses, starting with variable expenses. Turn up the thermostat in summer months to save on cooling. Eliminate clothing, dining, and other expenses for now. Don’t forget that your fixed expenses could also be reduced. Now may be the time to review your insurance plan with your carrier to determine if you qualify for discounts. Other fixed expenses that could be reduced include cable, cell phone costs, and charitable contributions. Take a calculator with you everywhere, and record your expenses daily to ensure you’re on track.

Reward yourself. You’ve worked hard and sacrificed your time and desires. Once your credit card debt is paid off, reward yourself by redoing your budget and allowing yourself a small luxury at a time. Quit your second job, if it’s the first thing you want, or perhaps you’d rather buy something you’ve disallowed yourself. Be sure to stick to your new budget so you don't slip back into old habits.


About the Author

Sara Huter is a professor of economics. Her background also includes risk management in the banking and energy industries with expertise in credit scores. Huter received an M.B.A. in finance from Texas A&M University and a B.S. in information systems from Kansas State University. She has been writing for over five years with work at, and

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