Should I use calories earned from exercise?

General rule is if you're meeting your goals, change nothing. So if you've lost 20 pounds in 2 months (which seems excessive--that's more than 2 pounds a week), whatever you're doing, I wouldn't change...as long as your goal is to lose weight and your doctor says it's ok.

If you started to exercise more, I'd eat those back. I'll make some assumptions, and they're probably not true, but they'll illustrate a point, and you can fit them to your situation and see what the reality is.

You're eating 1,200 calories. If you're losing 2 pounds a week (I'm rounding), your maintenance is 2,200 calories a day.

Here's the assumption: Say you run for 45 minutes and burn 500 calories, but don't eat them back. You netted only 700 calories that day, which is less than a third of your maintenance calorie intake. That's unhealthy (and likely to cause you to indulge later, if you're the type). You'll end up losing too much lean body mass at the same time as fat mass because you're starving your body. I'd eat those calories back, but make sure it's high-nutrient stuff.

Besides...ever seen Austin Powers Goldmember? If you lose too much fat too quickly, your skin will end up having the same flaps as Fat *kitten* at the end of that movie. Don't want that. Slow and steady wins the race, no pun intended. Or maybe it was intended. Who knows. Point is, eat them back, but make sure you eat it back in good foods. And you might want to rethink your fat loss rate.

You should eat back at least a portion of your exercise calories. I wasn't when I first started exercising and I was HANGRY all the time.

I'm lazy about weighing and measuring food, so I try to only eat back half of mine unless I have some crazy burn like on my long run days.

I try to go for eating around half of them back, but some days I eat all of them, some days I eat none. Do what feels right.

For example: if I work a 9 hour shift and we're busy (I have a fairly physical job), I know that I'm burning a lot of extra calories at work from running around, lifting, and just moving more in general. On those days, I won't guilt myself over a pancake or an extra slice of pizza, because I am hungry and my body needs fuel.

If, however, I don't work that day and the most exercise I get is from taking the dog for a long walk, I'll record the exercise for the sake of making myself feel better, but I won't make up for those calories in food since the exercise is so low-impact and the MFP calculator is quite likely overestimating what I burned on leisurely walk with the pup.

What helps me to stay in check is knowing that it is a weekly balance. Using MFP's weekly nutrition analysis tool is extremely helpful--that way, days I burn a lot but don't eat back can help me visualize balancing out the days I eat a little more and don't burn much.

But don't look at my diary because last week was horrendous for me!

TL;DR Listen to your body; I talk too much.