The Best Way to Allocate Your Automatic Payments
You know what to do: It’s the start of a new month, and suddenly your bank account is taking a hit from multiple automatic payments on the same day. Rent, utilities, subscriptions, loan payments—it all adds up to a crushing blow. Instead of letting your account drain all at once, a better system spreads out your automatic payments over the course of a month.
List your automatic payments
First things first: if you haven’t already, you should automate your finances . Credit card payments, rent, retirement contributions—everything works. Make a list of all your automatic payments and when they typically arrive in your account each month. Consider significant costs like rent and car payments compared to more flexible subscriptions like your streaming services.
Prioritize your needs
Mark fixed expenses that have set due dates, such as rent, mortgage, car payments and minimum loan payments. They should appear at the beginning and middle of the month.
Lay out the rest
Now schedule more flexible bills (utilities, Netflix, gym membership, etc.) evenly over the rest of the month. Most companies allow you to choose your payment date, so take advantage of this. Here’s a rough schedule to ensure your bank account doesn’t take a major hit on the first of every month.
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On the second of the month: Once your paycheck is deposited into your checking account, a portion of your paycheck (about 10%) will immediately go into your 401(k) plan.
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On the 5th of the month: Periodic contributions are transferred from your checking to your savings account and to your Roth IRA.
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On the 7th of every month: Your credit card (and other bills) are automatically paid.
Payout match
Another tip is to try to ensure that some larger payments fall a few days after your paycheck is due. This gives you a safety net and allows you to avoid overdrafts .
Check manually
After your scheduled automatic payment date, check in to ensure your transactions went as planned. Mastering the dates and amounts of your payments will help you stay on top of things as you review your recent transactions for discrepancies. Because while most automatic payments make your life easier, keep in mind that some of them could end up costing you a lot .