If the area is spreading, you need to see a vet ASAP. It could be that there was a minor infection there that is now spreading into nearby follicles. Folliculitis is nothing to fool with--we just had a bout of it and it got pretty messy:
http://www.pets.ca/forum/showthread.php?t=48242
See if your vet will allow you to pay in installments, but get your dog to a vet ASAP, please!
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