Here’s my system for managing my finances.

Before the month begins:

I create a monthly budget using the You Need A Budget spreadsheet-based software.

First week of the month:

My wife receives her paycheck on the last day of the month. I deposit her check into our local bank, withholding a month’s worth of cash for daily expenses. How do I know how much cash to withhold? It’s in our budget. We use cash for various, miscellaneous, daily expenses.

I then login and initiate a transfer from my local bank to my ING Direct Electric Orange Checking Account. (I just recently opened this account, and I’m really enjoying the 4.00% yield and the bill pay feature.) The amount of the transfer is determined by the amount that I have budgeted for monthly, recurring expenses, and how much I need for local bills.

Once the money is deposited with ING Direct, I then need to send online bill payments to the various companies with which I do business. (I manually enter each bill payment. I am NOT a fan of “auto-drafts”. I do not like the idea of giving control of my checking account to any company to whom I owe money. This philosophy counts double where creditors might be involved.)

By the way, for a detailed breakdown of how I use my browser to manage my bills, please read this article from the archives: My (Very Simple) Bill Paying System

Second week of the month:

I receive my paycheck the second Monday of each month. Again, I deposit my paycheck in my local bank. After writing checks for a few “local” bills, I transfer the remainder to my ING Direct Savings Account.

Third and fourth weeks of the month:

I receive various payments from advertisers. These payments arrive in my Paypal account and then are transferred to my ING Direct account. (After reading a comment left by MikeVX, I wanted to clarify this point. My Paypal account is actually LINKED to a secondary checking account at my local bank. The secondary checking account is then linked to my ING Direct account. So, the money flows from Paypal, to my checking account, and then to ING Direct. There is no DIRECT connection between my ING Direct account and Paypal.)

Throughout the month:

I use my debit card for various non-billed expenses. I actually have two debit cards, one associated with ING Direct and the other with my local bank. Some months, I deposit enough money in my local bank to cover non-billed expenses, and other months, I transfer enough to ING to cover non-billed expenses. I pay for most of these expenses with cash, but I like to use my debit card to buy groceries and gas. I login to each account and move money accordingly.

Last day of the month:

At the end of the month, I zero-out my local checking account, ’sweeping’ all but $500 into my ING Direct Savings Account. (I keep $500 in my local bank at all times.) Finally, I ’sweep’ remaining funds from my ING checking account into my ING savings account.

If I am working towards an investment goal, like contributing to a Roth IRA or an ESA, I will save the total amount in my savings account, transfer that amount to my checking account, and then write a check from that account to the investment account. This usually occurs at the end of the month, after all monthly obligations have been met.

One last thing, if we have cash ‘left over’ at the end of the month, it gets deposited in our local account, and the process starts over. Basically, I ‘zero-out’ or ‘base-line’ all of my accounts, each month, and start over. I don’t have budget categories for annual expenses and I don’t roll-over excess money from month to month. All excess money goes into my savings account where it sits until needed for an annual expense or investment account allocation.