Step 1: List Your Monthly Bills and Pick the First One to Replace

The idea behind Replace a Bill is simple. Instead of trying to “make extra money” in general, you pick one monthly bill and build a small side income that covers it. When that bill is covered, you pick the next one.

Before you choose, you need to see all your bills in one place. That takes about an hour with a pencil, and it is time well spent.

Step 1: Write down every monthly bill

Gather your last two or three months of bank statements, card statements and paper bills. Then list each bill with three things: what it is, how much it costs, and the day it is due.

The Consumer Financial Protection Bureau has free printable worksheets that help, including a bill calendar and a spending tracker. Print them, or copy the columns onto paper.

Don’t forget bills that come once a year or are charged automatically, like a streaming service, a phone app, a magazine or a club membership. These are easy to miss.

Step 2: Mark the easy ones to trim

Some bills can shrink before you earn a cent. Put a star next to any that you could call about, switch, pause or cancel. Smaller bills are easier to cover, so trimming comes first.

Step 3: Pick your first bill

For a first goal, choose a bill that is:

• Small. A $10 to $40 bill is a good starting size.
• The same every month, so you know when you’ve hit the goal.
• Something you would be glad to stop worrying about, like a phone plan or a streaming service.

Write it at the top of a fresh page: “My first bill: ____, $____ a month.”

Step 4: Work out what you really need to earn

Your side income needs to cover a bit more than the bill itself. Card or app fees come off each sale. And if your side work counts as self-employment, the IRS says self-employment tax of 15.3% applies once your net earnings reach $400 for the year, on top of any regular income tax.

So add a cushion. Many people set aside a share of each payment for taxes in a separate envelope or account. How much depends on your situation, so a tax preparer can help you pick a number.

A word about benefits

Extra income can also matter if you receive benefits. Social Security has an earnings limit for people under full retirement age, and earnings count for SSI. This is general information; check your own situation before you start.

Step 5: Track it

Each month, write down what you earned and what you set aside. When the side income covers the bill for two or three months in a row, circle it. That bill is replaced. Then go back to your list and choose the next one.

Sources

• Consumer Financial Protection Bureau: Your Money, Your Goals toolkit
• CFPB: Bill calendar tool (PDF)
• CFPB: Spending tracker (PDF)
• IRS: Self-employment tax (Social Security and Medicare taxes)
• Social Security Administration: Receiving benefits while working
• Social Security Administration: Understanding SSI income