One of the first major challenges I had to overcome during my financial turnaround was right there in my own back pocket. It was an overstuffed monstrosity, holding several credit cards, a gigantic pile of receipts, and a plethora of other nonsense. When I actually needed something out of it, it was a challenge to find it amidst the chaos - but somehow it was easy to find a credit card in amongst the junk.

What I eventually found is that an optimized wallet helps with personal finance recovery and with remembering seldom-used but key pieces of information. When I moved from using the wallet as a catch-all to using it as a tool, I began to realize that it could save me a lot of time and money compared to the way I used to do things. Here are six of the tactics I used.

Junk all but at most two of your credit cards.
This is the most important thing you can do, especially if you have a constant temptation to bust out the plastic more often than you should. First thing first: find a good general use credit card. Just one, and I can guarantee you it’s not the credit card you got at the checkout counter during your last giant shopping binge. Once you’ve identified that “best card,” take every other credit card in your wallet and chuck ‘em. Put them in a safe place that’s not in your wallet. Eliminate the balances on all of those extra cards, then eventually cancel them.

This tactic works well because you don’t have a lot of choices. You can’t look at eight cards in your wallet, think “This one doesn’t have a balance on it… I’ll use it!” and spend away - you have to face that one card and know that you’re putting a larger balance on it. Plus, if you’ve chosen the card well, you’ll be racking up some decent rewards with it.

Wrap a picture of your goal or inspiration around your credit card.
Still not convinced of your own willpower? Take that one credit card and wrap a picture of your personal finance goal or your inspiration around it. Wrap that picture around your card and tape one edge of that picture to the other picture, creating a pocket or a sleeve for the card to live in. Then, when you feel the urge to pull out that card, you’ll pull out that picture, too, and it will serve as an immediate reminder of the big dreams you’re postponing to make this little trivial purchase.

I personally used a picture of my son in this way for most of a year until I broke my bad credit card habits, because he was the inspiration for my turnaround. Whenever I pulled out my credit card, I’d see his face, and I couldn’t help but reconsider my purchase.

Use it for password storage.
For some people, this seems crazy, but it really works. I keep a half-sheet of paper in my wallet, folded up a few times, that keeps some of my passwords on it. I don’t keep ones that I use regularly enough to remember them, just the ones that I don’t use very often. I also don’t directly indicate which site each username/password is for - just something that reminds me what they’re for - a precaution against a stolen wallet.

Edit: Some people jumped on this as being a bad idea. However, Bruce Schneier, an expert on security issues if there ever was one, agrees with this approach wholeheartedly.

Merge some of your rewards cards.
I’m a big fan of maximizing customer loyalty programs to get free stuff, but one drawback of that is that you end up accumulating a bunch of cards in your wallet. No more. You can merge several cards onto one by using JustOneClubCard.com, which allows you to create a single card with the bar codes from up to eight programs. I have one of these and it eliminates the space for seven cards in my wallet - and makes it so that I don’t have to hunt for a particular card at the checkout.

Process your wallet once a week or once a month.
I find my wallet is the place to collect receipts and other small financial detritus. While it’s efficient as a junk collector, it doesn’t take long for that wallet to get nice and fat with garbage. Thus, once a week, I process what’s in my wallet, getting rid of all of the unnecessary receipts and other little documents that I pick up. If I need to do anything with these pieces, I just take care of it right then so that I don’t have to worry about it. This keeps my wallet thin and keeps me from embarrassing myself with a monstrous wallet full of garbage.

A corollary to this: if you find yourself actually in a routine of processing your wallet, it becomes a very convenient place to put stuff that you know you’ll need to look at again soon - almost like a mini-inbox in your pocket.

The next time you buy a wallet, don’t buy a cheap one.
I have owned four wallets in my life. The last one has lasted longer than the other three combined, but it cost double the price of the others right out of the chute. What does that mean? Don’t hesitate to spend more on a quality wallet that will last for years, even if there are cheaper options available. You’ll end up paying less per year with a really good wallet than with a cheap vinyl one, thus saving yourself a bit of money and a bit of time, too.

Regular readers of this website have seen that the idea of lists in various forms comes up over and over again. I make “lists” of the stuff I need to do, lists for the grocery store, lists of home and auto maintenance tasks, and so on. I haven’t even mentioned many of the things that I use lists for, either.

So why do I use lists so much? They provide a lot of benefits in my life.

First, they save me time. Rather than standing around and wondering what I need to do next, I just grab the list and do the next item on it. I don’t worry about whether or not I need to clean the windows or change the furnace filter, I just check the list. That way, I can save my actual thinking for other things.

Second, they save me money. Making shopping lists keeps me on focus in the store and minimizes the unnecessary purchases that I might make. If I trust in that list and know that it tells me everything I need, it becomes much easier to buy only the stuff on the list and keep everything else out of the shopping cart.

Third, they help me organize my thoughts and ideas and plans. I constantly make lists to organize all of the thoughts floating around in my head, transforming them from idle thoughts into organized structures that I can move forward on. Rather than just thinking idly about something I’d like to do, I lay out the details in the form of a list, put them in a reasonable order, and then look at what I can do to get the first item done, much like my 101 goals in 1001 days list. I do the same thing when making a decision - I list the pros and cons and use them to help me make up my mind, as I did a while back when thinking about becoming a stay at home dad.

Needless to say, I’m addicted to lists, but it wasn’t always that way. It took a lot of effort to effectively integrate lists into my life. Here’s how I did it.

First, I made the tools for making a list incredibly handy in my life. Not only did I start carrying a notebook and pen in my pocket everywhere, I started keeping a notepad and pen on the fridge to write down a grocery list, a giant whiteboard to jot down household tasks, and so on.

Next, I started putting effort into piecing out complex plans on paper. Rather than just sitting around mulling things over, I just started jotting down each thought as it floated into my head. I usually don’t use any sort of order at first - I just let the ideas flow, then spend time organizing them later. This works incredibly well for me. Lately, I’ve been using Microsoft OneNote (when at my own computer) and Google Notebook (when on the road) for this task, as it’s easy to write down little pieces of information and then easily move them around, edit them, and organize them how I want.

Then, I started creating lists of things to do routinely. For example, I have a list of tasks I want to accomplish each day, from brushing my teeth and shaving to reading three books to my son. I found that Sciral Consistency works very well for this. Sciral Consistency lets you make very easy checklists of tasks you want to complete every day or every few days, like watering the plants every three to five days, etc.

At this point, I naturally began to deeply trust my lists, and I began to practice what amounted to Getting Things Done.

Just try it! Try keeping a list in your pocket and use it to write down anything that you’ll need to remember later, and then look it over daily. Also, try getting a notepad with a magnetic backing and put it on your fridge - and tie a pen to it so you can write things down without hesitation. Those two things will start you down the path of using lists in your life - and you’ll come to find that they’re incredibly efficient time and money savers.

Over the past several months, I’ve started to really bank on a system of two checking accounts for my personal use, a system that has confounded a lot of people in my life. “Isn’t having two checking accounts rather confusing?” I’ve been asked more than once. “What’s the point?”

It turns out that there really is a point in doing it this way and using both is not at all confusing, as the two accounts serve very different but complementary purposes. Here’s the scoop.

About a year ago, I was very disappointed with my checking account at a major bank chain. They were constantly finding new and creative fees to ding my account with and I was getting sick of it, so I decided to seek out a new checking account, which I wrote about in the past.

During that process, I made a list of checking account features that I was really looking for:
+ no fees, period
+ some percentage return on my account balance, the higher the better
+ a nationwide fee-free ATM network
+ free online bill pay
+ the ability to write paper checks
+ the ability to easily visit a teller whenever I wanted
+ the ability to have 24/7 phone-based customer service

I quickly realized that in order to get some of these options, I was going to have to use a large, international bank. Thus, I started looking at the interest checking accounts offered by some large banks and quickly came across ING’s Electric Orange checking, which at the time offered a 4% APY on your checking account balance. This account hit home runs in four areas:
+ it had no fees, period - not even overdraft fees (they allowed you to essentially “borrow” the money to pay bills, then pay that back with interest, which usually just added up to pennies)
+ a 4% annual return on my balance, calculated daily and compounded monthly
+ a free online bill pay service and online account access
+ a fee-free nationwide ATM network
+ a 24/7 phone-based customer service

However, the account was missing two key features for me: you cannot write paper checks and there are no tellers you can visit to conduct business like cashing checks and so on. This frustrated me at first, but I decided to make the move to Electric Orange anyway.

Shortly thereafter, I closed up my account at the large mega-bank and then opened a checking account at my local bank in town. It turned out that my local bank offered the services I was looking for: a free checking account with online access and a branch not far from my home to do business with a teller if I so wished.

So now I have two checking accounts I use regularly. I keep most of my balance in the one that pays interest, from which I do online bill pay and most of my other transactions. However, that local checking account allows me to have a checkbook for free and gives me teller access, so I keep a few hundred dollars in there at all times and just use it for writing paper checks and any services that a teller might be useful for.

This system works incredibly well for me. Since there is no account at any bank that provides all of the services I’m looking for, I found that using two banks in this capacity works extremely well to provide all the services I need.

This post is part of The One Hour Project, in which you can spend just one hour to put your finances in a better place without a big lifestyle change, through frugality or other financial choices.

Many people (myself included, until pretty recently) have a box of “important papers” where they toss things that they know could be vital someday but they often don’t recall what is exactly in there. I used to keep mine in a small safe; my parents keep theirs in a safety deposit box.

Try spending some time to simply go through all of these important papers so that you understand what exactly is there and why it’s there. This serves a lot of purposes.

First, you may discover things that are out of date that you need to update. Things like passports often get tossed in these important papers and forgotten about until they’re desperately needed - and then it may be too late to get them updated for when you need them (or else it’s very expensive). I had a friend pull out a passport a day before an international trip only to realize that the passport was out of date - not good.

Another important document that may need updating is a will and/or revocable living trust, documents you should look into and create if you have a significant other or any descendents.

You may find an old life insurance policy that you’ve been paying on but not thinking about for years - do you really need it? Should it be updated? Does it have cash value that should be cashed in?

Second, you may discover items that could be better used elsewhere. For example, when I recently went through some old papers, I discovered a small number of savings bonds that I immediately cashed in and used to help with student loan debt repayment; I also found several vintage baseball cards that have some significant value but that I won’t be cashing in. In short, this one hour not only helped me find some things that I really needed to get done, but it also ended up with me having some additional cash that I didn’t have before.

Third, some effort in organizing these papers may make it easier to find things - and thus make this pile of “important papers” more useful. I found that taking these essential papers and organizing them was an essential first step in getting all of my financial papers organized, and doing that helped me to get a much clearer picture of my current financial state than I had before. Here’s how to get started with your own filing system if that’s of interest to you.

Going through the “important papers” box might only take an hour, but it might unearth some financial rewards and will definitely produce some additional peace of mind.

This weekend, my mother, who is still firmly in the era of the handwritten check, marveled several times at my methods for paying for many things. I showed her how I had online bill payments set up, used my credit card for a number of purchases that she would have used a check for, and so on. After a few days of this, she basically shook her head and said that she would be completely lost without her system for balancing her checkbook.

Not really understanding why it was so important or what exactly balancing a checkbook means, I asked her how she does her checkbook. She showed me a nice neat ledger of each deposit and withdrawal from the account that she keeps in the back of her checkbook that reflects what she calls the “real balance” of the checkbook. Then, whenever a statement comes in from the bank, she compares that list of checks and deposits with her own to make sure that the bank’s records match her own.

I realized pretty quickly that I do basically the same thing, just with online accounts and receipts. Here’s how I effectively “balance the checkbook” each Sunday when I do my weekly financial review (where I also calculate my net worth).

Throughout the week before, I save every single credit card (and check card) receipt in my wallet. These serve as a reminder of what I’ve spent over the last few days. I usually jot down what it was on the receipt if it’s not clear.

On most Sundays, I take that pile of receipts and itemize them in Excel. I usually like to keep track of my spending in various categories so I know what areas I’m doing well in and also doing poorly in. So, for example, a receipt from the gas station goes in the pile for automobile expenses and so on.

I also check the balances of each of my credit cards and my checking accounts. I look through the new things posted to the accounts in the last week and make sure I understand what they all are - and also make sure that anything I’ve spent has posted to the account. I usually then go ahead and pay off the credit card balances immediately using online bill pay. I then get rid of all receipts that have posted to the account and have no chance for tax write-offs via the paper shredder. This usually leaves one or two receipts that I leave on my desk to check next week.

On the rare occasion that I write a check, I use the carbon copy of the check as a receipt and do the same things as I describe above. I also know, by using my online account balance and subtracting any outstanding receipts and any automatic bill payments that will happen in the next week, how much cash I have on hand.

This little procedure, which takes about ten minutes, does a fantastic job of ensuring that I don’t ever come close to overdrafting my checking account. It also helps me to process my receipts, something which used to be a big problem for me. It has the same effect as the old-school checkbook balancing without the huge time consumption of managing one of those old-fashioned ledgers in the back of the checkbook.

Of course, the older system does work - my mother claims to have never had an overdraft in thirty years using her system. That’s a pretty good track record of success, I’d say. I simply prefer my system because it has the same effect and works better with my lifestyle.

Even though I cover almost all of my expenses using plastic, I do tend to keep a small amount of cash in my wallet to cover emergency situations, tips, and such things. This seems to be a regular thing for many people - most people seem to have a bit of cash tucked away for just such purposes.

Here’s what I keep tucked away and why:

Four $20 bills This is enough to cover almost every cash-based emergency that I can think of, such as paying a tow truck.

Four $5 bills and five $1 bills I keep these for tipping purposes, for dining and drink service, for example. If I know I’m going to be traveling, I up this amount quite a bit.

Other than this, I essentially don’t carry cash any more - my regular purchases all happen on a pair of rewards cards (between the two, I get between 3% and 6% cash back).

The question really comes down to risk: is this more cash than I should be carrying at any given moment? Given the benefits of having the cash when I need it, it’s a risk that I’m willing to take - the odds of a robbery in the area where I live are so low that it’s almost a non-factor.

In fact, the biggest risk of having this cash on hand is a temptation to use it. I sometimes think of it when I see a frivolous purchase and I attempt to justify using that cash for things I don’t really need.

To solve that, I generally tuck this cash into a pair of tiny pockets in my wallet so that they’re hidden from regular view. Then, when I actually need the cash, I am reminded of it, but during most normal activities, it never comes into my mind.

What’s your “cash on hand” policy?

As I’ve briefly mentioned on here before, I’ve almost entirely abandoned paper checks. I keep a checkbook around for the rare situation where one is needed, but I have written exactly seven checks in the last six months and all of those were to local businesses.

Over the last two years, as I’ve gotten more and more used to online bill pay, my bill paying cycle has become largely automated, with only the variable amount bills (mostly utilities and cell phone) actually requiring extra attention.

Once a week, though, I do go through something of a “bill paying” routine. Here’s what I do.

First, on Monday through Saturday, I collect all bills and statements on a pile on my desk. I check the mail, look at anything particularly interesting, and flip the rest onto a stack on my desk. I do the same thing with receipts from purchases that could possibly be tax-deductible. The rest of the routine takes place on Sunday afternoon and eats a half an hour or so.

I check the account balances of all of my accounts. This is just to make sure that there are no surprise charges or anything like that. I usually record the balance of all of these accounts in Excel because I keep pretty tight tabs on my net worth (yes, I update it all weekly and have an awesome little graph of the last year or so, moving steadily upwards with bumps and valleys here and there).

I sort what I have Basically, I pop open all the envelopes and put them into four piles: I need to deal with this (unpaid bills, stuff to look at more carefully, etc.), I need to file this (statements), I need to shred this (less important stuff that may have personal info, like checks from my credit card company), and the trash can (envelopes and inserts).

I deal with the “need to deal” pile Most of this is usually handled with online bill pay. Usually, an item or two requires a bit of research. As I deal with these items, I note on them in pen how I handled it and move it to the “I need to file this” pile.

I file away all printed statements and receipts that could possibly have future use Everything in the “I need to file this” pile gets filed away.

I shred All the stuff in the shredder pile gets shredded up. I actually save the shreddings for kindling for camp fires.

I do any leftover financial review I deem necessary This would include stuff like reading a mutual fund prospectus, doing some research, checking my budget if I’m worried about it at all, and so forth. I don’t like to carry around a big “I ought to do this” list for my financial stuff, so I try to take care of it at week’s end each week.

And then I’m done! It takes between a half an hour and an hour and leaves me with a strong sense of accomplishment.

Angela writes in with the following situation:

I didn’t see any archives where you unexpectedly come into money. My husband is re-enlisting for a big chunk of change (in the end we will get about 37k after taxes). Here is where we are now:
Credit Card 1 - 10k @ 14.25%
Credit Card 2 - 1k @ 16.99%
Debt consolidation loan - 11.5k @ 14%
Truck loan - 12K @ 12%

So you can see that we can pretty much wipe the slate clean there. Here is my real question. Will all that debt just gone, we will have a little over $2,000 a month left over. How do we make sure that we are not just going to blow it? We have four kids to put through college and a neglected retirement fund to look at. But it seems like it is just too much money to really handle. Help!

According to my math, that debt is about $34K, and you’re getting about $37K. With interest rates like those, you’re definitely in the right to pay all of them off as soon as you get the money. Step one is to get that debt completely gone - any time you’re paying out double-digit interest, you’re never going to get ahead.

This leaves you with about $2,000 a month in excess on your monthly budget, which is great. I also understand that, without a plan, you’re going to be prone to spending all of it, which is not great.

What I would do is start automatically putting that money in various places. Set up automatic deductions from the paycheck into a 401(k) and into 529 college savings accounts for each of your kids - $500 a month into the 401(k) and $100 a month into the 529s will eat up $900 of it.

What about the rest? First of all, I’d build up a nice emergency fund to protect yourself from things like a car breakdown - if your car dies and you suddenly have a large bill at the auto repair place, you don’t want to dip into credit to cover it. I would set a goal of having an emergency fund equal to six months’ worth of your monthly budget - with four kids at home, lots of things can happen when you least expect them. This will siphon off that extra $1,100 each month for a while, but when the time comes, you are going to be incredibly happy that you have that money.

What about when the emergency fund is full? Between now and then, spend some time with your husband figuring out what your most important goals are. Do you want a bigger house? A better retirement? Do you want to really fund your children’s education? Some amazing family vacations in the future? Paying cash for automobiles so you never go into debt again? Each of those goals points to different things to be doing with that money. By putting cash into an emergency fund now, you’re not only building security, you’re also giving yourself plenty of time to think about what you really want to do with your money after the emergency fund is completely funded.

My wife and I dream heavily of a country estate, for example, so we’re focusing on paying down all of our debts with some seriously large overpayments right now, then saving rapidly for this home.

The real key, though, is making it automatic - just set up automatic deductions into appropriate accounts. That means that you’ll never touch that $2,000 a month and never be tempted to spend it. Good luck!