Breaking down expenses

Now that you’ve reviewed your current monthly expenses, you have a better idea of where your money is being spent on and what kind of expenses those are. This article will focus on grouping those expenses into basic categories (e.g. basic necessities, entertainment, credit cards), and also identifying each due date for those expenses (For example, your Netflix bill is due on the 13th day of each month) which will allow us to better plan ahead to ensure we never miss a payment and incur any kind of fees! Let’s get to it!

Step 1. Categorizing Expenses

I personally categorize these expenses as:

  • Basic Necessities – Monthly Bills (Electricity, Water, Food, Gas, Phone), and Mortgage payments.
  • Entertainment – Netflix, Spotify, Amazon Prime, and other subscriptions that you use.
  • Credit Card Debt – Self-explanatory (Department store credit cards, financial institution cards)
  • Loans – Student loans, or other long term loans such as a vehicle loan.
  • Other – Gym membership, charitable donations, etc.

Categorize them all in your notebook as seen here:

From the previous exercise, you should have seen any late payment fees that you potentially incurred. These happened because you did not pay them in time and are potentially forgetting when payment due dates occur, don’t worry, we’ll take care of this soon, I promise!

Step 2. Note your monthly due payments

Note the due dates for these withdrawals to ensure you know exactly when these charges will take place. For example, my internet bill is due every 20th of the month (See below), and I use my credit card to pay for it.

Continue with this exercise until you make an extensive list of all of your reoccurring monthly payments to ensure you know when they all due. This will help us in the future as we will be using these dates to better plan ahead to ensure we never miss a payment and incur any kind of fees!

Your list should look similar to this:

As seen in this example, my total monthly payments are $1538.99 , this gives me a better idea of my expected monthly expenses and the due dates which take place. Think about these fixed expenses in relation to your monthly income and you can get a rough idea of how much money you’ll have at the end of each month.

Next, we’ll take a look at those services we might or might not need that can help us cut down on some of the expenses, this is an optional step.

Step 3. Cut back on __________

Now that you’ve had the opportunity to go through your categories and list out the due date for your payments, it is a good time to start reviewing your entertainment category and seeing what services you truly use and if you should continue using that service or cancelling it. (example: you have a Hulu subscription but only watch a movie every 2 weeks. You might as well pay $1.99 to stream an individual movie in Amazon/YouTube). Additionally, you may want to look for free alternatives for any of these services. I used to have an audible subscription for audiobooks, and since then have replaced it for a free alternative called Libby.

Example of cutting back:

Even if you cannot cut back on certain entertainment or subscriptions, this is a good opportunity to review your current expenses and perhaps it’s a good idea to revisit your plans and possibly get a better deal (e.g. Spotify premium for student -$4.99 vs. regular premium plan – $10.99).


By the end of this exercise you should have accomplished the following:

  • Grouped your expenses into categories to identify your “essentials” vs. your “non-essentials”
  • Determine the due dates for all of your monthly fixed expenses & services. This will come in handy soon as we’ll contact our lenders to change these days so we never miss a payment!
  • Ask yourself if subscriptions or services can be cancelled, and/or look for free alternatives or better plans.

Take a second to pat yourself in the back as you have gone through the difficult process of reviewing your expenses, breaking those expenses down into categories, and ultimately identifying when your fixed monthly expenses take place. In the next few articles we’ll touch on those credit cards & loans with various interest rates and see which ones we can tackle first and ultimately go debt free!

I know this is time consuming and not the most fun exercises; however, we’re setting up a good foundation for our automated financial system which will give you peace of mind and ultimately the flexibility to invest in the things that matter.

Stray strong!

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