How to budget in 6 simple steps - Step 3

A budget is a plan you make to spend your money. Budgeting stops you overspending, helps you save to reach your financial goals and, contrary to popular opinion, actually gives you the freedom to spend money on the fun stuff!

The process is quite straightforward and requires you to sit down at the end of every month to budget for the month ahead. It may take a few months to understand the process fully but after that, it's a cinch.

In this 6-part series, you'll learn how to create a zero-based budget and these six steps you need to follow to budget on a monthly basis:

1 | Manage your bills with a Bill Register

2 | Record your income on an Income Tracker

3 | Reduce your debt with a Debt Tracker

4 | Save money with a Savings Tracker

5 | Create a Monthly Budget

6 | Track your spending with a Monthly Expenses Tracker

Yesterday we covered step number two with the Bill Register. Today is step number three, the Debt Tracker.


Step 3 | Debt Tracker

If you have a debt or two or more, it can be easy to stick your head in the sand and hope they'll go away but it makes sense to put some thought into your debt payoff stratgey. Knowledge is power and knowing exactly what your debts are and having a plan to pay them off can actually ease your stress.

There are two approaches you can consider when paying off debts:

1. The Snowball Method

Pay the minimum amount on all of your debts except the one with the smallest amount owing, to which you throw as much money as you can each month until the debt is gone. The next month you contribute as much money as possible to the debt with the next smallest amount and so on. As you pay off each debt, the amount of money you have available to put towards the next debt increases, hence the snowball analogy.

2. The Avalanche Method

Pay the minimum amount on all of your debts except the one with the highest interest rate, to which you throw as much money as you can each month until the debt is gone. The next month you contribute as much money as possible to the debt with the next largest interest rate and so on. The debt with the highest interest rate may be one of the larger debts you have so when it's eventually paid off, it represents a large chunk of your debt diappearing, hence the avalanche analogy.

So what are the pros and cons of the Snowball Method and Avalanche Method of paying off debt?

The Snowball Method versus the Avalanche Method

The key benefit of the Snowball method is that you will get a quick win when you pay off the first debt and then another quick win when you pay off the next smallest debt and so on. It helps maintain motivation as you seemingly gain traction early and increasingly as you pay off each debt. However, this may not be the smartest method as you may continue to pay more interest on larger debts while you pay off smaller debts that charge less interest.

The key benefit of the Avalanche Method is that you will end up paying less interest and you'll pay off your debts sooner. However, it takes a lot more discipline if your high interest debts are your larger ones and it can feel there's a lot of pain for little gain.

Regardless of which method you use, or if you choose to use a combination of the two, you can help stay focused and maintain motivation by having a visual representation of how far you've come with a printable Debt Tracker.

This Lorna Leigh Lane Debt Tracker has several different trackers in different colors which you can use for your various different debts.

To use, complete the sections as follows:

DEBT: What is the name of your debt? For instance, Student Loan or Alliance Credit Card.

INTEREST RATE: Check your statement to find out what this is. If it's variable, you can put an average amount. This will help when deciding which debt to pay off first.

MINIMUM PAYMENT: Check your statement for this information as well.

PAYOFF GOAL: What date do you want to have this debt paid off by?

DATE DUE: What date are your monthly payments due? Eg., the 12th.

Then, whenever you make a transaction on this account, complete the details in the table below and watch as the balance reduces.


Budgeting is easiest with templates that you can re-use each month so you can get into good financial habits.

The Lorna Leigh Lane Home Budget Ultimate Planner Kit contains Debt Trackers and plenty more editable templates including pages to create monthly budgets and track your spending as well as debt repayments and savings tracking pages.

To get your Home Budget Ultimate Planner Kit click the button below below and give zero-based budgeting a try.

Shop Lorna Leigh Lane Printables Now


Read on here for Step 4 | Savings Tracker.

Happy planning!