I love the hands-off automated simplicity to personal finance that Ramit Sethi, author of I Will Teach You To Be Rich, puts forth in this post. Love it. It’s simple, elegant and would keep me from having to deal with finances very often, which for ill or good I find to be among the most unpleasant experiences on earth.
If it could work for me.
But it can’t, because both my wife and I are totally, irregularly, unpredictably freelance. She works as a makeup artist and I currently nanny part-time (schedule changes week to week), work at a comic shop part-time (only one day a week is regularly scheduled), write comics part time (highly variable) and do some occasional part time personal assisting. Neither of us receives payment on anything resembling a regular date or for anything resembling a standard amount. We often don’t know until that week we’re receiving anything at all, or that we have a gig until a day or two before. So automating transfers and bill payments for the same time/amount every month simply will not work. Some weeks we’ll receive no checks at all, some we’ll receive five smallish ones. Some months we’ll see almost no pay at all, some months are big pay months.
This is the solution I’ve developed:
The Joy of Batching
In case you’re not familiar with the word, batching means grouping like tasks together in order to accomplish them more efficiently. I learned the term from Tim Ferriss.
So here’s my 4-part system:
1. Batch deposits
Every time a check comes in, I simply set it aside. I have a wall pocket I use, but the location can be any place of your choosing. The more convenient the better. Then, every other Monday I make a trip to the bank with any and all income that’s come in the past two weeks and deposit it all as a single deposit. Including travel time to the bank, this takes me about 30-40 minutes total every four weeks.
2. Batch bills
Every time a bill comes in that needs to be paid, I simply set it aside. Somewhere separate from where I set checks aside. Then, every other Monday when I get back from the bank I pay as many of them as possible based on their priority and how much I just deposited. I pay every bill possible with a credit card that gives me mileage rewards because my wife and I love to travel. If I have to spend all this money on bills every month, then we might as well get a trip out of it.
3. Batch transfers
At this same time I make transfers for tithe and savings. When our income is at ideal levels, we live and pay bills on 50% of our net, tithe out of the gross and all the rest goes into savings. In times when we’re living close to the bone, of course, the savings portion is liable to be redirected as living expenses/bills. For a great look at how to handle what you’re saving, see Ramit’s post referenced above.
4. Cash-only spending
When I’m at the bank I get two weeks worth of spending cash for my wife and I. Half of it goes to us immediately for the coming week, the other half gets set aside at home until the next Monday. Neither of us is any good at tracking our spending and it has gotten us into a lot of trouble before. This is the perfect solution for our shortcomings, a “pre-tracking” of our spending. We know the cash in our wallet has to last a full week, and if we don’t have cash there, then we can’t spend. You’d be surprised how little spending is actually necessary. The exceptions I make to this rule are gas, groceries (which we usually do together) and, of course, emergencies. Those go on the debit card, which in itself is also a form of “pre-tracking” in that if the money’s not in the account, the card will be declined.
The whole process takes an hour or less every two weeks. That’s as close to automated as we can get. Close enough for me. Generally stress free.
Of course, I realize life is messy and sometimes a deposit has to be made or a bill paid ASAP and it cannot afford to be batched. Fine. Do it. But the more regularly you follow this system, the less often you’ll find those situations arising.
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