A Simple Way to Feel Wealthy on a Middle Class Income

May 27, 2009 by  
Filed under Budgeting

This post is about simple things that a not so rich person can do to feel wealthy.

As baby boomers, Mr. and Mrs. ToughMoneyLove have been around the financial block a few times. It started with getting married while I was in law school, living a grad student life without the benefit (burden actually) of student loans. We have come a long way since then. Our journey of 31 years and counting has allowed us to experience a lot of the ups and downs of living with and without money.

Part of my learning process has included small steps that can improve your financial mental health. More specifically, I have an initial  suggestion that may help some folks feel wealthy even if their income is definitely middle class. 

Pay All of Your Bills at the Beginning of the Month

Please don’t laugh and leave after reading that heading. Take a few seconds and push on. There is real value to be derived from that simple statement.

I read about a very interesting psychological research study a few years ago. The research showed that crossing something off your personal to-do list each day was more effective than anti-depressant medication in elevating the moods of the study participants.

Can that really be true? The research says yes.

I know that it works for me. When I complete a task I have been dreading, I feel great. It sets me up on a positive wave for the rest of the day. I’ll bet many of you have had similar feelings.

In our world of money, worrying about paying bills is a constant downer. Many of us dread confronting the reality of our obligations. The payment process can be drudgery. We don’t like seeing money slowly draining from our bank account. We are concerned about cash flow, as in running out of money before the next paycheck. We end up putting off the bill-paying as long as possible. 

All of these negative thoughts are exhausting. They make us feel poor. Feeling poor only compounds the bad mood that creeps in our mind and lingers.

So why not put an end to those feelings by taking the bills off your to-do list as soon as possible?

How to Pay all of Your Bills at the Beginning of the Month

The bean counters out there are already protesting this concept. They say that we should keep our money working as long as possible, surrendering it to our creditors only at the last possible minute.

There is financial truth to that argument. But I think the good feelings that come from putting the bills behind us can outweigh the financial benefit of waiting. Plus there is a way to accomplish both.

The biggest obstacle that most people will have to paying bills all at once is cash flow. These folks are living paycheck to paycheck. Getting off that treadmill is the first step. That means frugally sucking it up for a month or two, to accumulate enough free cash at the beginning of the month. It can be done and it will be worth it. Do it.

Of course, you don’t have to start at the beginning of the month. But there is both calendar and mental logic to doing it then. The arrival of a new month brings a new paycheck and signals the time to pay up and be done with it.

The second step is to gather all of your paper and electronic bills – every one. If necessary, contact your creditors and get them to adjust your billing cycle. Alternatively, learn how to access your creditor accounts online so that you know what you owe before the bill arrives. That is easier to do than you might think. Most creditors love sending electronic statements.

The third step is to cut the checks or issue the electronic payment instructions. This means sending what you owe now, not later. Everyone gets paid until there is no one else to pay. You want the bills off your back – right now.  

If you hate the idea of sending money to a creditor ahead of schedule, there is a plan B. Use a separate bill-paying account. Schedule all of your electronic payments from that account at the beginning of the month, with payments staggered in accordance with the actual due dates. This is important: Transfer all of the money needed to fund those payments into that bill-paying account at the beginning of the month. This allows you to completely forget about cash-flowing your obligations for the entire rest of month. That is very relaxing, believe me.

Now live the rest of your month in financial peace, feeling like a wealthy person.

The Payoff – Feeling Wealthy

Here are the reasons why I feel better – and wealthier – after having paid all of our bills at the beginning of the month.

1. All the money that remains in your daily operating account is yours – to save or spend in accordance with your own plans. No one else has a claim to it. For most of each month you experience a high level of financial freedom, similar to being completely debt free. That feels good.

2. You can make daily spending decisions without having to worry about whether an unpaid bill will leave you short. That’s how wealthy people make spending decisions. If your budget allows for a splurge now and then, your splurging becomes blissfully stress-free.

3. Within a few days after you pay your bills, your account balance becomes reliably real. You have no worries about staggered bills and payments floating around. What you see on your ATM receipt or online bank balance is what you get. Refreshing.

I predict that you will have similar feelings. The money “high” you will experience after paying that last bill can sustain you. That wealthy feeling will probably energize you toward a debt-free life, the ultimate payoff.

Good luck.

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12 Responses to “A Simple Way to Feel Wealthy on a Middle Class Income”
  1. Michael says:

    I do something very similar. Since I’m paid bi-weekly (26 times annually) what I do, is set aside an amount equal to 1/26 of my estimated annual expenses (estimated from a few years’ worth of data in Quicken) into a separate savings account at ING. The balance of this “bills” account floats up and down over the course of the month as paydays and bills come and go.

    What it comes down to is basically two Friday afternoons a month I take the time to set up all of the electronic transfers for the bills that are to occur before the next payday. It usually doesn’t take more than an hour. Pretty stress-free I think…

  2. philip says:

    I don’t really worry about mine. I have all recurring bills charged directly to my credit card. That leaves 3 payments that I have to think about. My mortgage, my credit card and my auto loan payment. I try to pay my credit card the day it is due (scheduled in advance) and pay my mortgage as soon as the check that is designated to pay it comes in so it will cut the interest a bit on there.

    I do like your idea of setting it up this way if I were not putting it on the CC though.

  3. TStrump says:

    As an accountant my initial reaction is that it would be a better use of cash to delay bills as long as possible … but the funny thing about personal finance is that psychology is probably a lot more important.
    I like your tips about paying bills at the beginning of the month – managing money is all about feeling good about yourself and those little accomplishments.

  4. Kacie says:

    Interesting concept! For awhile, I delayed bill paying so my checking account would earn just a bit more interest. The thing is, it never amounts to much.

  5. The beancounter in me says that you should pay your bills at the last possible moment without defaulting. The human in me says that it’s a great feeling knowing that all of your bills are paid for the month. The human side overruled the beancounter side when I decided to pay off my mortgage early. There’s great comfort in knowing that all of your obligations have been met.

  6. Gail says:

    For the past 5 or 6 years I’ve been making it a habit to set aside an hour or so the last week of every month to draft a simple projected income/expense report for the following month. Just this one habit has been tremendously empowering–it’s brought me much peace of mind and a sense of control over my finances like nothing else has. And since I started doing this my savings rate has increased dramatically. I know at the beginning of the month exactly what bills need to be paid, where the money is going to come from to pay them, and how much positive cash flow I’m going to be able to generate to be added to savings that month. But I feel that there are many good methods to pay bills and each person needs to find a system that works for them–and stick to it. Even if you don’t choose to pay all your bills at the beginning of the month (or this isn’t possible or practical), just getting a handle on the situation at the beginning of every month can make a positive contribution to one’s financial mental health.

  7. richgirl says:

    I’m a dork and go one step further: I pay bills the week I get them, if not the day I get them. The extra interest earned by delaying payments amounts to pennies, which is not worth the mental aggravation. I’d rather free up that brain space for other things.

  8. There’s nothing like listing to-do’s and seeing them disappear one by one to lift your spirits and relieve stress!

    I use something more like your Plan B, which is to pay all regularly recurring bills from a special bank account, into which enough cash is deposited to pay the total of the highest historic amount of each bill. However, instead of arranging to have them paid at the beginning of the month, I arrange to be billed between the 15th and the 20th. That way, the dratted semimonthly pay periods don’t scotch me up: by the 15th, no matter how far out-of-synch with reality the precessing paydays happen to be, there’s always enough to cover all the bills, which are automatically paid.

    The advantage of setting aside the highest possible amount the bills could cost is two-fold: 1) in any given month, enough is available to cover even an outrageous set of bills; and b) because I do not let the utility companies to average costs over the year, electricity, gas, and water are significantly lower than usual. This allows a nice “cushion” to build up in the bill-paying account, in effect “snowflaking” some extra savings. Once in a while, I move this accrued savings into a higher-paying account. So, in a way, I’m literally saving money while paying bills.

  9. Bret says:

    This is definitely the way to go.

    I pay myself first, then I pay my bills, then I live on the rest.

    As you said, it’s a great feeling when all of the bills are paid and the rest of your money is all yours to enjoy. It’s hard to explain this to others, but it’s the only way to live.

  10. threadbndr says:

    I do something similar – I have a “bills” account that everything but one or two small bills come out of (entertainment type items like the newspaper subscription and netflicks). I also have my transfers to savings set up to come from that account. Like vh, I budget that funding to be the high average, so that over time a small cushion builds up.

    The other checking account is a ‘daily use’ account and contains what I can spend on daily life – gasoline, grocery, spending money, eating out, theater tickets, knitting yarn – whatever I want to spend it on. I do track my spending, but as long as the TOTAL is within the budget, I don’t worry much about individual categories. Small cushions tend to build up in that account as well and then are spent on a planned splurge – right now that’s going to be a season ticket to the local community theater.

  11. I am loving the input on different ways to implement this general concept. I plan on writing about them in the near future. Thanks and keep them coming.

  12. red rabbit says:

    Here is my basic financial routine:

    Retirement/savings – 20% if my income; auto-deducted into the appropriate accounts and left untouched

    Bills – I get my paycheck every two weeks. As soon as it is deposited I pay all of the non-auto-deducted bills that have a balance regardless if it is due or not. Then I check all of the accounts that are auto-deducted and make sure the right amounts are being taken out at the right time. All of this takes only 10 minutes. I only have to think about bills for about 20 minutes each month, the rest of the time is mine.

    Spending – I have a petty cash account that I use for groceries and other day to day purchases. I put in a specific amount and keep to a budget, any that is left over when the next paycheck comes in gets dumped into savings.

    That’s really about it.

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