Personal financial advice

Congratulations go out to you if you have taken on your debts and conquered them!  If you are still on the journey, keep it up.  If you have tasted the freedom of spending your money in a manner you see fit rather than on financial obligations, you know that all of the frustrations are worth it.

The journey between debt-ridden and debt-free can be frustrating. The moment that the emergency fund is fully funded is the moment that an emergency happens. Budgets can seem inflexible in the face of changing circumstances. There are too many choices about what to do once extra cash is in hand.  Are there any ways to make the trip to financial independence a little easier?

There are few techniques you can use to reduce the mental load of your money, and maybe even make the process a little fun. Here are some management methods to help you along your path.

Paying Bills Online

Paying your bills online is the easiest and most effective way to take the stress of making sure the important bills get paid first. Nearly every utility, insurance, and cable company offer online payment options. Even if they charge a convenience fee, it’s still worth it. Why?  Your time to write out checks, find stamps, and mail your bills off is more valuable than the dollar or two you have to spend to press a few buttons and be done with it.

However, don’t set up timed withdrawals from your account.  The timing usually has a way of backfiring, and banks love to charge overdraft fees.  If your bills are pretty constant and you have trouble remembering to pay on time, set up a separate account and have enough money deposited in there each check for the creditors to withdraw. You’ll still need to pay attention to it in case of an unexpectedly large bill.

Pay Bills Immediately

If you would prefer not to let the bank and the creditors take money out on their own, the other alternative is to pay all of the revolving bills as soon as you have the money in the account.  It doesn’t take that long (maybe half an hour) and you’re set until next paycheck.   This method saves not only time but willpower.  Paying the bills and removing the money also removes the temptation to spend that money. 

Larger bills which take more than one paycheck are a little trickier, but they can be easily handled using the next method of money management.

The Hybrid Envelope Method

There are three types of bills: revolving, non-revolving, and self-generated. 

Revolving bills are bills which come up every month no matter how much you paid into them the month before.  Power, cable, phone, water, rent, and natural gas all fit under the umbrella of revolving bills. 

Non-revolving bills are bills which can be paid down, like the credit card, mortgage, or car payment.  These are bills which, at some point, you won’t have to pay anymore. 

Self-generated bills are the day to day and week to week expenses like gasoline, groceries, and fast food.  These expenses are ones over which you have the most control. 

The hybrid envelope method starts with the payment of all revolving and non-revolving bills through online methods.  Get the money out of the account as soon as possible once your paycheck hits. Next, decide how much you’re going to spend for the pay period on self-generated bills.  If you don’t have an idea about what your normal expenses are, take a look through your online account statements or Mint.

There are a lot of people who budget their revolving and non-revolving bills down to the last penny but completely forget the self-generated bills.  Several people treat these like exceptions to the budgeting rules even though expenses like gas, food, and conveniences come up every month.

Withdraw the money for self-generated bills in one dollar bills. Why one dollar bills?  Doesn’t it feel great to have some money in your pocket as you’re walking down the street?  How about the confidence that’s received by holding a large stack of cash?  Since these are miscellaneous expenses, nothing should be terribly expensive, but If you like, get the cash in fives or tens.

Put the amount allocated for each of the self-generated bills into a labeled envelope.  If the envelope gets too thick, create multiple envelopes (seal the future envelopes so you get the joy of opening them and finding cash inside) for that particular set of bills. 

Put your debit card away and spend cash.  Spend like that for gas, food, and the like.  You’ll find that with this approach that you get a more intimate look at your money.  You also won’t have to worry about outspending your budget because you’re not tapping into the main account. Be sure to leave at least $20 in your main account for unexpected service fees though!

Using these three tactics together reduces the number of times that you have to exercise your financial discipline and willpower.   There’s very little chance of faltering, as the temptation to spend everything in the account is removed when you put the debit card away.  And, if you have anything left over, you can give yourself sealed envelopes of cash for fun money or deposit it into savings.