Week 2: Spend Less, Save More

This is Week 2 of our Zero Debt Action Plan, which is designed to help you get out of debt even faster! Learn more and sign up for the 9-week plan right here.

Last week we showed you how to start tackling your debt (if you want a refresher, check out Week 1 again). This week, we’re taking the next step: Creating your target budget and reducing your monthly spending.

It’s almost impossible to achieve your financial goals if you can’t stick to a budget… or if you don’t even have a budget in the first place! By making a budget and tracking your spending, you can reach your financial goal more quickly, whether that means getting out of debt, buying your first home, or building up your retirement fund.

Action 1: See your money flow

Look at your spending (10-15 min): Go through your expenses for the last month. Add up how much you spent on the following categories:

  • Housing
  • Transportation
  • Food
  • Clothing
  • Entertainment
  • Phone Bills
  • Utilities
  • Insurance
  • Other

We want this to be useful to you, so add or subtract additional categories as necessary to match your needs!

Action 2: Create your target budget

Get on the same page with your partner: If you are married or in a long-term relationship, you will need to tackle this next part together. You must both be 100% committed to reducing your monthly spending or else it won’t work.

Set your goal (5 min): A reasonable goal is to reduce your total spending by 10% in the first month. Start with that, and then, if you’re successful, you can aim to reduce it by another 10% in the following month (and so on).

Make a plan of attack (10 min): Now, look back at your spending numbers from Action 1 above, and decide which categories you’ll cut back on to reach your 10% reduction. Write down these new numbers, along with the amount you’re cutting, like this:

  • Meals: $300 ($30 cut)
  • Clothing: $50 ($25 cut)
  • Entertainment: $70 ($10 cut)
  • Phone Bills: $50 ($5 cut)
  • Gas: $100 ($10 cut)

These numbers are your budget for the month! Now what you need to do is…

Use our awesome spreadsheet: We’ve created a super-spreadsheet that you can easily use to organize your budget. This is so necessary if you are serious about sticking with your plan. The spreadsheet allows you to enter your planned spending amount for each category and then enter your purchases every day to see how you’re doing. That way, you can tell at a glance whether you’re on pace to succeed. And the spreadsheet is flexible enough to work with your unique situation. (You can also try this spreadsheet from EnemyOfDebt.com)

Choose a system to hold yourself accountable: To make sure you stay disciplined, here are a few different systems you can use, from the high-tech to the old-fashioned:

The Cash Envelope System: Withdraw enough cash to cover your weekly (or monthly) expenses according to your budget. Divide it by category and place the cash for each category into a separate envelope. Then, spend accordingly. Once the cash from an envelope is gone, you have two choices: (A) don’t buy anything else in that category until the next week/month, or (B) take cash from a different category to put in that envelope. (For more about this method, check out this blog post from MoneyCrashers.com)

The Debit Card System: Slightly modify the Envelope System by using a debit card instead of cash. Instead of putting cash into the envelopes, just write down your budget for each category on the back of a separate envelope and then do the math to subtract the amount of each purchase you make throughout the month (or week). When buying gas, you would pay with your debit card and then mark down the amount on the “Transportation” envelope when you get home.

Mint.com: A very detailed budgeting tool that is useful if you want to track lots of categories and update it frequently. You can also change your budget mid-month or mid-week to reflect changes in your financial situation, and get alerts when you go below a certain amount in your budget categories.

Adaptu.com: Similar to Mint, you can link your accounts and use it to organize and visualize your spending data. For example, you can see how much you spent last month in each category – groceries, entertainment, clothing, etc. Then you can quickly enter the amount you want to spend next month for each category and it will create a budget plan that you can track and easily follow.

To ensure that you’re staying on track, check in with your status every week and make sure you haven’t spent more than you planned. If you did, figure out the reason and try to fix it by limiting expenses.

Action 3: Cut your spending

Now you know how much you can spend, and how to stay disciplined, but you need specific tips to help you spend less and hit your targets. That’s why we’ve gathered the most useful tips we could find, and we’re putting them all here so you can easily reference them in one place:


Set a weekly budget for lunch and dinner (10 min): Meal costs can add up surprisingly quickly, so it’s a good place to start. Set a budget for lunch and dinner, in order to motivate yourself to spend less on things like eating out.

Plan your meals (30 min per week): Create a chart that has columns for breakfast, lunch, dinner, and snacks. Make it long enough so that you can plan out an entire week. Then write in your planned meals for each day. This will allow you to…

Prepare meals in advance (30-60 min): One of the reasons it seems convenient to eat out is that cooking something on the fly is hard – especially if you just got home from work and you’re hungry and tired. The solution is to do the majority of the prep work the night before. Some tasks, like slicing vegetables, can even be done on the weekend so you don’t have to worry about it during the week.

Have frozen ingredients on hand: As a backup plan, you can put things like beef and broccoli in the freezer for a quick stir fry that will take less time than driving to a fast food place.


All in one trip: If you plan one week’s worth of meals in advance, you can get all the ingredients in one trip. That way, you’ll save on gas or the cost of public transportation, and you’ll be able to…

Find coupons for the specific items you need: Websites like DealSeekingMom and RetailMeNot usually have a list of coupons for a variety of different food items. These can save you as much as $50 per week, depending on the size of your family.

Be aware of what’s in season: You can lose money by purchasing fruits or vegetables that taste bad or rot quickly because they are out of season. Click here for a great interactive guide on what’s in season in your state.


Board game night: Instead of taking the whole family (or your friends) to the movie theatre or the mall, organize a board game night There are so many classic board games – from Monopoly to Clue to the Game of Life – that you’ll surely find one everyone enjoys. (And these are often steeply discounted at stores right after Christmas)

Use the library: It’s amazing how many free books and videos are just sitting there waiting for you at your local public library. Many libraries have a good selection of popular movies, and of course enough books and magazines to keep you occupied for weeks.

Day trips: No matter where you live, there are probably some great day trip opportunities nearby! Take a bike ride to a nearby park and have a picnic. Find a nice trail to hike. Or look for museums or art galleries that have low-priced or free admission. (Also, if you’re a AAA member, you can get discounts at many museums, zoos, and other attractions)

Cell phone

Get a family plan: Despite the name, you don’t have to be family to share a plan with someone. Find as many of your close (and trusted) friends and family members as possible to be on a family plan with you. Split the costs evenly and you’ll each save quite a bit of money.

Make sure your plan matches your needs: It doesn’t make sense to have an unlimited plan if you don’t use your phone a lot, and conversely you don’t want a 200-minute plan if you’re using 400 minutes per month because you’ll get drowned in fees. Fine-tune your plan so that you are not paying a lot of extra money to your cell phone provider.


Gym membership: Believe it or not, you can get a gym membership for as little as $14 per month if you buy a 24 Hour Fitness pass at Costco. The catch is, you have to make a 2-year commitment. However, as long as you’re SURE that you will continue to use it for two years, it’s a great deal. Alternatively, if you can’t get to an affordable gym but want to workout regularly, buy some inexpensive, lightly used equipment on Craigslist.

Auto repair: Surprise car maintenance bills can wreck your budget if you’re not careful, but one thing that can help you save hundreds of dollars is to research the prices for aftermarket parts. When replacing something like a headlight or a hood, you can get quality parts for less than half the price. Just be sure to study the options carefully before you buy, and use a site like Edmunds to ensure you don’t end up with faulty equipment.


The actions in this e-mail are perhaps the most important of all because they’ll help you direct more of your income toward paying off your debt and pursuing your other financial goals. These tips may take some time to implement and perfect, so stay focused and keep your momentum going. Don’t get down on yourself if you slip up – just keep trying. Remember, this is the year you accomplish your goals. And next week you’ll get incredibly useful tips for improving your credit score, so be on the lookout for that e-mail, as well!

—To read previous weeks of the plan, click below—

Week 1: Start Eradicating Your Debt

Also, click on the button below if you’d like to try ReadyForZero, a free online tool for helping you get out of debt:

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