Over the last couple weeks we have been intentionally consolidating our financial accounts. The credit card I signed up for back in college to get a free t-shirt, gone. The bank account I opened to get a great deal on financing from a local car dealer, gone. It is actually empowering to eliminate the noise from your financial life. Less statements, less chance of identity theft, less balances and account numbers to keep up with.

However, there are good reasons to keep at least one bank account, and one credit card, that you don’t use often for physical transactions. These two tools make up your personal finance firewall, and provide a layer of protection between you and those trying to separate you from your money.

I first heard of a bank firewall account from Jim at Bargaineering. Since, like him, I complete a number of transactions online each month, I thought it sounded intriguing. I’ve implemented something similar in my own finance life, and even taken it a step or two further.

First, so you can get an idea where I’m headed with all this, check out the following video from Jim as he explains the concept of a bank firewall account. If the video doesn’t display for you, you may need to click through to the site to view the embedded video.

Jim Wang provides an excellent overview of the bank account firewalls concept.

Like Jim, I also think ING Direct is a great place to set up such an account because of their interface for transferring money, and the ease of creating multiple accounts. Of course, there are plenty of other top online banks to choose from.

Most fraudulent activity associated with vendors such as PayPal involves a thief obtaining the user name and password for a PayPal user’s account, and initiating withdrawals from the user’s primary bank account tied to that account. By only having one account associated with various online payment vendors, and keeping a very low balance in that account, you can minimize the amount of money exposed should your online payment account become compromised.

When the couple online deposits associated with business activities hit my bank firewall account I immediately initiate one transfer to my self employment tax sinking fund for roughly one-third of the gross amount. The remaining amount is transferred to my business checking account in the form of profit, from where I write myself a single check at the end of the month (after business expenses are paid) as sort of a bonus salary.

In addition to maintaining the firewall bank account for accepting electronic deposits, I also held onto a single low-interest, high-reward credit card to use specifically for making online purchases and regular monthly subscriptions or recurring bills (Netflix, cell phone bill, etc.). For these types of purchases, I prefer to use a credit card because I am exposing about 99% of the risk to the bank, rather than my personal bank account.

At the end of the month I receive a single statement for the credit card, review the list of transactions for accuracy, and make a single online payment to pay off the card. I choose to make the payment manually, because if fraudulent charges appeared and I did not yet have the transactions in dispute when the bill cycled, an automated payment for the full balance could easily wipe out my associated bank account.

Another benefit of using a single credit card is that I’m able to easily see a consolidated view of my recurring, monthly transactions. I like to play a little game each month and try to bring that total bill down as far as possible.

What extra service can I cut from our monthly routine? Which subscriptions are we just not fully utilizing? How can I shave more off my cell phone bill? The utility bill? It becomes a challenge each month to try to come in under the previous month, and having all the charges billed to a single card helps me see at a glance whether or not I’ve been successful.

If you work online, or receive online payments from a variety of sources, I’d encourage you to set up a bank firewall account to provide a buffer between you and your primary banking sources. Also, consider hanging onto one credit card once you are debt free, and simply running all recurring charges through the card. It makes for a simple billing process, and it allows you to play with house money, rather than your own.

Sandy writes in with the following dilemma regarding choosing a “real” job over continued freelancing:

Hi Frugal Dad,

I have a question that maybe your readers can help me with. I have been freelancing from home for over 10 years and have made a comfortable living at it. There have been bumps along the way, but for the most part when I lose a client, one seems to appear to fill the gap. I have been very blessed that way. It has also allowed me to stay at home with my kids, and I currently homeschool them as well. My husband works a full-time job with outstanding benefits, so we have that covered.

On a whim, I applied for a “real” job in another state which I didn’t expect would really play out, but surprise– it did. There is a very attractive salary offered, outstanding benefits, a ridiculous amount of vacation time,  and a pension (which I don’t currently have, though we do contribute heavily to my husband’s 401K). Part of the perks would be a free college education for my kids, who are currently in middle school. Even though they are currently homeschooled we had planned, and I know they want, to go back to “real” school next year.

So, what to do? Part of me likes the idea of job security — no more clients, no more constantly thinking about work. The other part of me is loathing the thought of giving up my my freedom of being self-employed. Housing in the other state is quite a bit more expensive than here, though we would stand to make a substantial gain on the sale of our current home.

To throw in another wrench, I was just awarded a very lucrative contract for my freelance business that would keep me solvent for the coming year. (I was getting a little nervous as work was seeming to dry up) After that, it would be up to me to find more work, though I do have a quite a few irons in the fire. Doing both would not be an option — there are only so many hours in a day, and I need to be a mommy to my kids too.

I have thought about just trying it out to see if it is a fit, but that would mean uprooting my kids and losing the contract as well.

What would you do? What other things should I consider that I haven’t?

Sandy, a few questions come to mind. What happens to your husband’s job if you relocate? Is his industry/expertise fairly transportable, meaning the likelihood of him finding a comparable job fairly high, even in this market?

I might be reading between the lines a bit here, but I don’t think you really want the new job. You have been a successful freelancer for a decade – not many people can say that. There is no shortage of people who start freelancing, but very few survive on their own for ten years.

On a related note, I would point out what is obvious to an unfortunate number of people these days – there is no such thing as “job security.” In fact, you may have more security, more stability, in hunting down work on your own using the experience and networking you already have in place as a freelancer. If you rejoin the corporate world, you are dependent on them to continue to find you work. If they fail, you will be unemployed, and will have given up a lucrative freelance contract.

The decision is yours and your family’s, as you recognize. But since you asked for my opinion, I’ll give it. If I was in your shoes, and my spouse had a stable job to cover benefits, and I had enough work to stay covered up for the next year, it would take a truckload of money to uproot my family and turn in that freedom for an employee badge. Whatever you decide, I wish you and your family well.

Ask the Readers: What would you do if you were in Sandy’s shoes?

In the 1800s, job-seekers were exhorted to ‘Go West, Young Man.’

In these recessionary times, it’s become ‘Go Anywhere, Young Man.’

As the unemployment rate climbs and it takes longer to find a job, more people are being forced to consider relocation to a new town for better job opportunities.

In fact, if you’ve been job-hunting for a while, you’ve likely expanded your search to cities far enough away that you’d have to make a move.

However, this long-distance job search can only go so far – travel expenses for interviews can add up, and you miss out on crucial face-to-face networking opportunities.

Plus, employers don’t want to pay relocation costs, so they’re less willing to talk to someone from out of town. Also, an out-to-town hire can take a while to start work, and there’s always the possibility the candidate will get cold feet and back out.

That said, moving to a new city without a job can be downright terrifying: you don’t have a regular income stream, and you won’t have as many friends or family nearby.

Still, a job’s a job.

If you want to move to a new town to help your job search, here are some ways to maximize your chances for success, while leaving some wiggle room in case it doesn’t work out — it’s not about taking a risk, it’s taking a calculated risk.

1. A cushion

Budget at least 8 months’ worth of expenses, including deposits for an apartment and rent.

The need for savings is obvious, but don’t forget the confidence factor: Getting a job is a lot about confidence, and having a nice financial cushion will help you come across as more confident (and less desperate) to a prospective employer.

It will also let you job-hunt without having to pick up a part-time job – you can throw yourself 100% into looking for a job in your field.

2. Using that couch?

If you have any friends or relatives in the town you’re looking to move to, ask if you can crash at their place for awhile. You might be surprised about how willing people are to help, particularly in this economy.

Not only will this allow you to save money, it will also give you more time to look for your own place eventually – don’t rely on the kindness of friends and family for too long.

3. Account-ability

One of the first things you should do when you get to a new place is open a bank account. You don’t want to fritter away your precious savings on ATM fees, and it’s much easier dealing with a local bank should you have issues with your account. You also might be able to find deals for people opening a new account.

And if you’re looking for rental housing, having a local bank will put a landlord more at ease.

4. Plant light roots

You’re more likely to rent than buy at your new place, so make sure you understand any ramifications from breaking a lease, just in case things don’t work out.

Also, consider keeping a storage space in your old town. This will lessen your need for a big apartment, while also helping you save on your moving costs.

This is also a good time to do an inventory of the possessions in your life, and whether you really need them – will you ever wear that high school letterman jacket again?

5. Plan B

Think about money-making opportunities if you don’t find a job right away. Consider part-time work in retail or any other field that you have experience in. If you frequent any retail shops regularly, get friendly with the staff in case you ever need to ask about work.

However, don’t plan out TOO far in advance. Life has many twists and turns that you can’t anticipate, so be careful of over-planning.

6. Network

Now that you’re on the ground, go go go – meet as many people as you can, join networking groups, industry groups, and attend any social media meet-ups you can find for the area.

When you meet people, be clear about why you moved, and what kind of job you’re looking for.

Remember: Finding a job is now your job, and networking is the best way to do that.

7. Get to Know the Town

Your time there shouldn’t be all work. Get involved socially – play recreational sports, find some hobbyist groups, join a church or synagogue.

Hopefully you’ve chosen a town that you’ve always wanted to live in. Get out and enjoy it – feeling more optimistic about your new home will make you more optimistic and confident in your job-search.

8. Start a Blog

Start writing about your adventures in your new town, and writing about issues in your field. You can impress potential employers with your attitude, your knowledge of the field, and your gumption at starting a whole new life in a brand new city.

And remember to keep it local. Blogging about local events and Tweeting with the locals will introduce you to people who can help you with the job search.

9. Talk to Those Who’ve Been in Your Shoes

You’re not the first person who’s made this kind of leap. Look for other people who’ve made similar moves, and talk to them about their experience.

Just knowing that someone else did this before – and succeeded at it – will make you feel better.

10. Taxing time

Don’t forget that some job-hunting expenses are deductible, as are moving costs in certain situations. Find out what you might be eligible for come tax-time, and make sure you save receipts for documentation.

If you’ve had some taxable income in the year, getting a fat rebate will be a welcome influx of cash.

The climb to debt freedom is just about complete in the Frugal household, and soon we’ll be enjoying the thrill of living free of the burdens of debt. While I recognize that roller coasters are an overused metaphor for life’s ups and downs, I can’t think of any other feeling to compare to almost being debt free. If you’ve ever ridden a tall coaster you already know what I’m referring to.

Photo courtesy of Hey Paul

It is that feeling you get just before your car has crested the top of the roller coaster’s tallest hill. When everything opens up in front of you. When the long, anxiety-filled climb is almost behind you. It’s an exciting time, and oddly enough that euphoric feeling in the pit of your stomach is nearly identical to the one you feel just before sending in your final debt payment.

By the end of November, we will have crested that hill. A hill that has taken us over two years of blood, sweat and tears (well, at least a lot of sweat and tears) to climb. And as the landscape opens up in front of us, our only regret is that we didn’t get on the roller coaster sooner. We wasted nearly a decade when it came to finances. Yes, we accumulated some debt, but we committed no real financial sins. We just didn’t buckle down like we should have.

I’m not going to rehash how we wound up in debt, or the financial mistakes of the past, because I don’t want to miss the view from the top by looking back the entire ride. The point is, we are where we are, and how we got here has been important in shaping our personal finance belief system going forward.

That’s part of living with no regrets. You accept the mistakes you’ve made along the way as learning opportunities, and keep moving forward. So much of our lives is wasted rehashing over and over again the mistakes of the past, rather than living in the present, and planning for the future. Well, a couple years ago we decided enough was enough. We were sick of being in debt, and we wanted out. So we finally got busy making changes and stopped making excuses.

We developed a plan to boost my income. After dabbling in a number of part time job opportunities, and even resorting to mowing lawns on the weekends, I decided to try my hand at writing. Of the few people I shared this idea with, only my wife and my mom didn’t laugh out loud in response. They knew my passion for writing, and believed in me. One of the things I’m proudest of was that Frugal Dad did become a relative success before my mom passed away, so she was able to know that my perseverance paid off. I only wished she had lived to see us cresting the hill.

Getting the blog off the ground wasn’t easy. I had a $0 marketing budget, very little experience in the online world, and no friends or contacts in the field. I started with a brand new domain name, FrugalDad.com, rather than buying an established name with page rank and traffic. I bought a $5 theme, and had one of my new blogging buddies work up a logo (he’s gone on to become very successful at logo/graphics work for other bloggers. Check out his work at LogosforWebsites.com).

For the first year all I did was write an article every single day and comment on as many other blogs as possible. Some nights I stayed awake well past midnight writing the next day’s blog. Other days I woke up at 4:30am to answer emails, comment on other blogs, and try to network with others. It was an all-out guerrilla marketing assault! My plan was simply to out-hustle everyone else, both with my blog and at my full-time job – the two fastest ways I could increase my income short of selling my own plasma (believe me, I considered it).

In addition to boosting our income, we had to get control of the other side of our personal balance sheet. Our expenses were out of control. At the time we had two car payments, a small pile of credit card debt, student loans, and even medical debt left over from the birth of my daughter. We took vacations when we couldn’t afford them. We shopped when we didn’t have money. We were basically living paycheck to paycheck.

We decided to draw a line in the sand. No more increases to the monthly budget. If we signed up for a new membership, we’d have to cancel another one (or two) to offset the new expense. We started clipping coupons, and actually thinking about ways to save money on groceries. We stopped going to movies, and started using our previously underutilized Netflix account. I sold my beloved Chevy Silverado and drove a 19 year-old van. We basically committed ourselves to a frugal lifestyle at a time when living frugal was not yet very popular.

The result of all this hard work? We now find ourselves less than a month from being debt free. My wife and I have a new motto: “Never again.” Never again will we go back to owing money. Never again will we limit our opportunities, and our choices, by being servants to a lender. Never again will we be at the mercy of bankers’ whose whims exerted control over our lives with FICO threats, interest rate spikes and ridiculous practices such as universal default. We plan to make ourselves immune from such policies in the future.

Our hands are in the air. Our eyes are open wide. This is going to be a fun ride!

“Firing” myself was the very best thing I ever did – and it might be the best thing that you could do for yourself too.

Before you conclude that I’m completely out of my mind, let me ask you a question:

Do you continue to disappoint yourself in some aspect of your (financial) life?  Spending, budgeting, saving, investing, earning?

If so, you may want to “fire” yourself like I did and “hire” a more qualified manager. The good news is, life will improve tremendously.  Even better, it may not cost you a cent to do it.

Let me explain.

I have a small business and (at times) I’ve suffered from the “Superman Syndrome”.

I used to think that I could do everything better, faster and smarter than everyone else.  I’m not proud of this but it’s true and it’s cost me plenty

Of course, as time went on, the facts and results got in the way of my ego.  There were certain things that I did very poorly and even though I knew it, I continued this self-destructive behavior.

Let me give you an example.

I love to tinker with the computer and many years ago, I designed a system to automate a part of my business.  It worked….to a point.  But it had some flaws that continued to pop up – and each time a flaw did come up, it cost me time and money to fix.

Rather than realize what was going on, I threw myself into the problem.  I spent more and more time trying to improve the program I wrote.

Finally, after months and months of wasted time and money, I “fired” myself and hired a programmer to do the job for me.

As a result of his work, I’ve saved countless time and money.  In fact, the money I invested in him was paid back in the first month just in reduced errors.  “Firing” myself turned out great.

Of course, the idea of “firing” yourself goes much further.

I’d like to give you another example:

When I first started my business, I was full of fear.  My wife was working in our home.  Since I was the only one bringing in money, I was deathly afraid of what might happen to our family if the business didn’t make it.

I experienced real financial terror growing up (since I was homeless for a short time) and I was fully committed to making sure that wouldn’t happen to my wife or kids.

Nothing wrong with motivation….but I became obsessed.

I refused to spend money on anything other than the bare necessities.  Keep in mind that we weren’t in debt at the time and the business was generating a decent income.

Even after the business established itself, my tight-wad ways continued.

I stayed in the fear-mode much longer than even I could justify.

I wouldn’t go out to restaurants or movies.  I wouldn’t buy anything and I would “encourage” my family to live the same empty life I imposed on myself.

I was miserable and I’m sure my wife was too.  It was no way to live.

Fortunately, I “fired” myself before my wife did.

“Firing” myself saved my family and made my life enjoyable again.

I’m pretty passionate about this because I think it’s terrible for anyone to struggle when they don’t have to.  If you face similar issues, here’s how you can “fire” yourself:

1. Write down what part of your (financial) life is out of control.

What problem do you find yourself confronting all the time?  What comes up? Are you constantly taking the wrong jobs?  Do you have the wrong spending habits?  Do you promise to track your spending….but never follow through?  What is it?

How do you hold yourself back? How do you sabotage yourself?

We all have character defects. What are yours? Are you lazy? Is that why you stopped tracking your expenses? Is that why you’re sitting on the couch rather than looking for work?

Do you fight with your partner about money because you are selfish? Have you stopped investing because of your fear? Does your arrogance alienate others who might otherwise provide good counsel?

2. How does it make your life unmanageable?

What is the result of your “best efforts”?  For example, as hard as I tried, I couldn’t stop worrying about money.  I couldn’t stop clamping down on my family – even thought I knew it was wrong.

Do you or your family go without? Do you constantly fight?  Are you making your partner’s life miserable?  Are you stressed constantly – no matter what you do? Do you spend recklessly and then wonder why you have a huge credit card bill (and then repeat this process over and over again)?

If you really want to get to the next level financially, be honest. It’s this lack of honesty that keeps people buying financial books and systems. They keep looking for the magic bullet that’s going to fix their problems. Instead, look for your own character defects and become willing to do the work.

3.   What have you done to try to get this under control and what was the result?

Have you made promises to others (or yourself)…..only to break those promises sooner or later?  Have you signed up for classes that might help you get a better job – only to not show up?  Have you installed budget tracking software, and then failed to use it?

This reminds me of the smoker who explains how easy it is to quit smoking; it’s so easy he quits once every day.

If the result is always the same – failure – you need a different solution.  And here it is:

Fire yourself

This advice may sound strange but think about yourself as a business.

If you had an employee who continued to mess up time and time again, you’d fire him, wouldn’t you? If someone demonstrates a complete lack of ability to perform a given task, she’s gone. Right?

Let’s say you’ve tried and failed several times to track your expenses. You’ve made promises to yourself that you break time and time again. You’ve failed yourself once too many times— so fire yourself.

Hire a better manager.

One way to do this is to “hire” an accountability partner and “report” to her.  It can be a friend or your spouse.  Anyone who has the qualities that you want.  Someone you trust and respect.  Someone you are willing to take direction from.

Keep in mind, that when you “fire” yourself and “hire” another person, your mind will play tricks on you.  There will be a little voice inside that will keep lying to you. It will tell you that you don’t need to follow direction.  “You are a grown up and you can decide things for yourself” the voice will say.

This is a lie.  You’ve already proven that.  That’s why I asked you to write down all the steps you’ve taken to try to correct the problem and what the results were.  There is no shame in asking for help – but that little voice inside your head will tell you that there is.

Don’t listen.

You “fired” yourself.  That’s all you have to remember.

Don’t be embarrassed to ask for help.

Look around. There are plenty of people in your life who would be happy to be on your team. Tell them what it is you want to do and do it. Tell them you want them to be your accountability “boss”. Tell them the problem you are trying to solve, be honest about it, and commit to take action and report daily or weekly, as the case may be. Tell them that they can “fire” you if you fail to live up to your promises.

This one idea has helped millions of people overcome serious problems such as substance abuse, and it can be invaluable to you as well.

Stop thinking and take action right now.

If you’ve gotten this far, you know what to do. Get a piece of paper and go through the action steps I outlined above.  Go “hire” your new accountability partner. Make the call now.

Don’t think about it anymore. Do it.

Fortunately, these techniques work for me. I have to keep doing the work by checking in with my accountability partner but it does work if I do my work.

Do you need to “fire” yourself?  Have you already done so?  What has been the result so far?