To give further insight into how I handle my finances, I thought I’d document the lifecycle of a bill at my house. Here are the steps I take with nearly every bill I receive:

Service Rendered
The first step in the process is my using a product or service that generates the bill.

Bill Delivered
I check my mail each day and open all bills. The envelope and other material included with the bill are recycled.

Bill Filed
I mark the due date both in my financial tracking software and a physical calendar. The actual bill gets placed in the right side of a folder.

Bill Paid
Just before (or on) the due date, I pay the bill electronically. Most of my bills are paid with my credit card, so that I can earn rewards points. My credit card bill is paid in full each month.

Re-Filing
I print the receipt of payment, staple it to the bill, and move it from the right to the left hand side of my bill folder. The bill is crossed off of my calendars.

Long-Term File
When a newly paid bill enters the left side of the folder, the same bill from the previous month is removed and placed in my filing cabinet. I have separate folders there for each account.

Shredding
I generally keep three months’ worth of paid bills in my filing cabinet, depending on the account. So when I add a bill to the cabinet, I remove the one from 3 months prior and shred it.

Recycling
My local recycling now accepts shredded office paper, so my final step is to place my shredded bills in the recycle bin.

In all, each bill spends about 5 months in my house from when it’s delivered by the USPS until the recycling company takes it away. Of that, one month is in the right side of my bill folder, one month is in the left side, and three months are in the filing cabinet. This system is thorough, but it’s easy to follow and has worked very well for me.

How are bills handled in your house?

The wage gap between men and women is a popular topic of conversation and analysis, but isn’t the only gap that exists in American business. Another common discrepancy exists in wages between single and married men.

A 2003 study of this wage difference was performed by the economics department of the University of California, San Diego with the hopes of quantifying the amount of the wage gap and identifying its causes. There are three common reasons given for why married men earn more: fewer household-related tasks allow them to focus on their careers, employers discriminately prefer married men, and the same qualities that make them more successful at work also make them more successful with women.

To eliminate (or reduce) the third factor, the UCSD study examined sets of identical twins, one married, one single. The conclusion reached was that being married amounted to 27% higher wages. A new theory for this discrepancy was also presented: married men may be inspired to work harder and seek higher wages because their success affects not only their own personal well being, but that of their wife and children as well.

Though these results come from just one of many studies on the subject, it is interesting to consider the result. Many people see a boost in their finances after they get married as many expenses become shared. For example, the cost for two people to live in a large apartment is generally less than if each lived in a small apartment. It would be easy, for the fact that the salary of the now-married man begins to accelerate can be hidden as a result. Perhaps it’s the combination of consolidation and wage premium that makes married life seem more conducive to getting ahead financially.

How does your wage compare to those of your colleagues with a different marital status than your own?

I recently received a replacement credit card for one whose expiration date was approaching. During the activation process I was repeatedly offered a credit card protection plan. I declined the protection and after looking into the details, you probably should too.

Credit card protection plans may vary between the different card issuers, but they basically perform the same function. When a qualifying life event occurs, the plan will either pay your minimum balance for you for a certain period of time or freeze your account so that no minimums need to be paid. Such plans are marketed as taking care of you at times when you are too busy or unable to make payments yourself.

Applicable life events include things like losing your job, experiencing a disability, having a child, or getting married. Depending on the type of event, the plan may go into effect for different durations. So you might get coverage for a year if you lose your job or a few months after having a child.

The first thing that strikes me about credit protection plans is that they either freeze your card or only pay the minimum for you. So either your card becomes unusable, or you’ll be charged the maximum in interest and fees since you’ll only be have the bare minimum paid. As someone who uses a credit card a lot and always pays off the balance in full, both of these options sound terrible to me.

Cardholders who carry a lot of credit card debt may see this program as a viable option if they themselves normally only pay the minimum. So the next factor to consider is the cost. Again, costs vary between different programs, but about $0.90 per $100 of balance is typical. So you’d pay $90 a month on a $10,000 balance. Instead of using that $90 a month to keep yourself in debt as long as possible (which is what paying the minimum does) consider how much faster you could become debt-free by adding $90 to your minimum payment. Assuming an interest rate of 20% and a minimum payment of the greater of 2% of the balance or $50, paying an extra $0.90 per $100 towards your balance instead of to a credit card protection plan would allow you to pay off your card about 25 years sooner!

A final benefit offered by most plans is to pay off your entire balance (up to a specific limit) in the event of your death. Since this benefit is essentially life insurance, you should compare the costs of the plan to an equivalent life insurance policy. Most consumers will find that they can get significantly more life insurance for much less money than from this credit protection plan benefit. A $50,000 life insurance policy would cost me $6.13 a month, but the same coverage through credit protection would cost an astounding $450 a month!

Looking at the costs and benefits of credit card protection plans will probably lead you to the conclusion that your money would be much better spent building up an emergency fund to handle a financial difficulty, paying more than the minimum to retire your debt more quickly, or purchasing more life insurance for much less money.

Were you persuaded to try credit protection and are you now having second thoughts?

One of the strategies that I advocate, saving raises, is a modified version of the pay yourself first technique. In both cases, the idea is to save money before you have a chance to spend it. The logic behind saving raises is simple, but the implementation can be confusing. After receiving a raise this week, I decided to document my thought process to help alleviate some of that confusion.

The main reason why saving raises works so well is that you’re already adjusted to your old income. Saving the raise should have no effect on your standard of living. Even so, you may choose to only save a portion of the raise and allow your spending to increase. It’s only natural to reward yourself for the hard work that earned the raise.

Once you decide how much of your raise to save, the next question becomes how to save it. If you are carrying high-interest debt on a credit card or loan, that’s an excellent place to put your raise to work. Resisting the urge to go out and spend a lot of money can be difficult in light of the apparent windfall a raise brings, but accumulating more debt is the exact opposite of what you want to be doing. Having more money may finally allow you become debt-free.

If you’re looking to bolster your retirement savings, then allocating the savings to your 401(k) or IRAs is a smart move. The general consensus is to contribute to your 401(k) until you’ve maxed out any company matching, then shift contributions to a Roth IRA, and finally use any additional money to increase your 401(k) once the Roth contribution limits are reached. Obviously, your age, goals, and financial situation might make a different approach more ideal.

Once your debt and retirement are both on track, the next place to look might be short-term savings. By building up your emergency fund and other liquid accounts, you’ll be better prepared to handle income disruptions in the future.

A final allocation for a raise can be contributions to your long-term savings and investment accounts. If other areas of your finances are on track, but you haven’t been able to invest as much as you’ve wanted to, a raise is the perfect means to do so. Investing means that you can’t spend the money now, but you can think of investments as deferred spending since growing assets will allow you to spend even more in the future.

Remember that though these steps should generally be done in order, they don’t have to be. If a promising investment opportunity presents itself, you may choose to use your raise towards that, despite having some debt or under-funded retirement and short-term savings accounts. You can also allocate a portion of your raise to all of these steps. With so many people out of work and job security feeling rather weak, it may seem strange to consider getting a raise. Still, being prepared for all scenarios will help you make good decisions, regardless of the one that actually comes to pass.

How would you save a raise you received today?

You may think that once you’ve traded in a vehicle that it’s no longer your concern, but if you still owe money on that vehicle, you may be in for a surprise if the dealership goes out of business. Those who bought used vehicles from a dealer that folds may also have their own vehicles repossessed.

The problem arises when a person trades in a vehicle that still has a lien against it. Typically the dealer offers to pay off the car, usually by rolling the payoff amount into the new loan. The trouble is that sometimes the old liens aren’t paid off before the dealer goes out of business. That leaves the previous and new owners at risk. The Associated Press recently reported that amid the rising number of dealership closures, this exact problem is also on the rise.

If the dealer files for bankruptcy, there is little recourse for the buyer or seller, since the dealership doesn’t have the money to pay off the lien as promised. That could leave both the previous and new owner partially responsible for the payoff amount.

Those selling cars on which they still owe money are advised to pay off the car before trading it in. If that isn’t possible, then working with a high-volume, reputable dealer will be the least risky course of action. Such dealers, particularly if they are part of a larger group of dealers, are less likely to go out of business.

If you are buying a used car, ensure that the title is in the name of the dealership (as opposed to the former owner) and that no lien is listed on the title. Many dealers will also provide a vehicle history report, but if not, you can always purchase one from carfax.com. The report will cost you $29.99, but might be money very well spent.

If dealerships paid off existing liens as they were supposed to, this wouldn’t be the problem that it is. When dealerships close and are filing for bankruptcy, such tasks are not necessarily their top priority. Anyone buying or trading in a used car should pay extra attention to the details of the process to ensure that their liability is limited in the case of a dealer bankruptcy.

Have you traded in a car on which you still owed money?