How do I Plan a Budget and Pay Off Bills?

Pay off your debt by establishing a monthly budget.
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Budgeting your income and expenses and paying off bills are skills that will help you for the rest of your life. After planning your budget and implementing a spending and savings plan, you gain control over your finances and can eventually form goals beyond paying down your debt. Make sure your budget reflects your financial needs year-round, and you will be able to fend off the usual budget-busters, such as winter heating bills, holiday gifts, daily indulgences, emergency medical expenses and home repairs.

Step 1

Get an accurate picture of your current debt load. Gather together your bills and examine the principle, interest and penalties you currently pay. Study interest rates and finance charges so you can determine which bills take the biggest bite out of your monthly income. Credit cards, personal loans and car loans potentially have the worst interest rates.

Step 2

Transfer balances on your highest-rate credit cards to a lower-rate card, preferably one with an offer of 0 percent interest on the balance for six months to a year. Do not make additional charges to this card--that triggers new finance charges and eliminates the grace period.

Step 3

Gather your bills and other financial records such as paycheck stubs, interest statements, investment dividend reports, insurance payments, mortgage transfers and tax statements.

Step 4

Enter your expenses on a budget worksheet. You can write your budget on a piece of paper, setting up categories and columns for expenses and income, or you can use a printed or online budget worksheet. Some online budget worksheets, like those at, allow you to graph spending and savings trends and identify areas to refine in your budget.

Step 5

Create an expense column for your outstanding debt as well. Assign money to pay off your highest interest balance first, and make sure you make timely minimum payments on all other outstanding debt. Once you have paid off the highest interest debt, tackle the next highest debt. When you pay off all debt, you can continue paying the same amount of money to a savings account.

Step 6

Itemize your sources of income as well. Place employment income, interest income and other sources of income in a separate column. Total the amount and compare the monthly amount to your expenses.

Step 7

Adjust your spending and savings plan as necessary. Many people have a cash leak that demands tracking daily expenditures on luxury items such as coffee drinks, protein bars, smoothies, cocktails, magazines and gifts. Give yourself a tight budget for these items so that you can afford to pay your monthly bills.

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