First of all, take a moment to pat yourself in the back as you’ve made it this far. To do a bit of a re-cap you’ve done the following:

• You’ve setup a direct deposit with your bank or have a steady income stream going to your bank. Additionally, should have an idea of how much take-home money you have at the end of each month.
• You’ve reviewed your monthly expenses and determined where your money is going each month.
• You’ve broke those expenses down into categories, and most importantly, you’ve noted the withdrawal or due dates which will come in handy in this article.
• You’ve also noted how much money you owe to your creditors/lenders along with the APR% for those and have made a decision on which loan to pay off first.

1. Re-visit your Monthly Due Payments

For this article, we’re re-visiting the monthly due payments list we compiled in this article (Step 2. Note your monthly due payments). The purpose of this is to change our due dates for those payments so that they get withdrawal at a convenient date that works with you. Ultimately, we want to ensure that we never miss a payment and thus incur any kind of late payment fee which will add more road-blocks in our path to getting debt-free and starting a new path in investing!

I know what you’re thinking, “I always remember to pay my bills on time so this doesn’t apply to me“, or “I never miss a payment because I have reminders setup on my smart phone”, and as much as I envy you for having an amazing memory and leveraging your smart phone to remind you, I still think this process should be automated. My solution is to not worry about remembering anything, and just to follow the rest of the article so we can implement automatic payments that work with our specific needs.

Again, here’s how my reoccurring monthly charges looked like before:

Now, as you can see, the due dates are all over the place. This makes it more difficult to plan ahead and leaves a lot of room for failures (again, potential late payment fees!).

2. Change your monthly due date payments

Again, since the goal here is not to remember due dates, let’s offload that reminder to our creditors!

Call your credit card company customer service, your loan lender, your Netflix billing service, etc. and ask them to change their withdrawal date or due date to a specific day that you choose. This will give you reassurance that all of your payments are being made at a specific date rather than scrambling and worrying about those late payments. Remember: we’re trying to avoid any kind of late-payment fees that you might have incurred because of late payments, so this step is important!

After calling various customer services I was able to change my due dates to the following:

Before moving on, I want to note that some of these methods will not work as some of your payments such as rent might not be automated easily (although some banks are able to send checks automatically to your Landlord, when in doubt, ask your bank!)

As you can see most of my monthly fixed expenses are paid off either the 1st or second of the month, then I pay my credit card in full on the 6th of the month. Important: make sure you give yourself enough time (4 to 5 days) from the point where your monthly charges happen to the day your credit card is paid in full (or monthly payment). I have seen instances where payments are not consistent and might take a few days to process. Other instances might be if you ever lose your credit card and might need some time to recover and update your payment methods (I will cover this in another article)

Alternatively, if you cannot afford to pay your credit card in full, or can only give portion of the payments, you can also change some of your due dates for the 1st of the month, then some after the 15th of each month, assuming that you get paid bi-weekly. This will put less strain on your finances and allow you to plan so that you have some income left for savings.

3. Calculate your monthly income

Now that you know when your monthly charges occur, take a look at your current paycheck and note the total amount that ends up in your bank account for 1 month. I’m talking about the Take-home money, after income-taxes, 401k contributions, insurance contributions (HSA), employee stock purchases, etc.

Add this total amount and subtract it from your monthly fixed expenses (your bills, loans, credit card payments). NOTE: Your personal expenses might be hard to calculate since you don’t know how much you’ll spend each month, and if you do then congratulations, you’re ahead!

If you don’t, I recommend you use your preferred money app calculations which break down past costs such as gas, restaurants, etc. and come up with a number, or alternatively you may use your credit card which should provide similar expense breakdowns. Otherwise just estimate.

The image below has the following calculation (Monthly Income = $3,500) – (Total expenses made up of (Monthly + Personal) = $2,250) = Total income left = $1,250 as seen below:

Now we have a better idea of how much money we would have at the end of the month which will allow us to determine what to do with that money. Decisions, decisions!

Conclusion

You’re much closer to our end goal which is to set you up an automated personal finance system that will allow us to tackle your current debt and set us up for a path of investment. As a friendly reminder here’s what you just accomplished.

• Minimized and/or mitigated the risk of incurring any late payment fees by changing the monthly due dates for your expenses.
• Calculated your monthly income by subtracting your take-home money minus your monthly expenses. This gave you an accurate depiction of how much money you’ll have each month that will allow us for better planning (savings, investments, or paying of our debt faster).

If you’re fortunate enough to have some money left at the end of the month, congratulations! Let’s keep the ball rolling and tackle our debts more aggressively. Are you in? We’ll cover that in the next article.