Sets all Set posted a blog post a while back on an interested method of paying down a debt he had to a friend.
Early September of this year(2009), I decided I was going to pay back the money I owed a personal friend. I was in a hard time financially and I had to borrow some money. I borrowed $600 from my friend a few years ago. We lost touch but I still remembered my debt. Being in debt is crippling. It lingers in the back of your mind…
So I decided to take control of the situation I was in. I wasn’t making too much money in my job but I was making enough to pay my bills, feed me, and buy some nice stuff for me from time to time. I noticed that I was spending money I could be saving. I would eat out every other night where I could stay home. I decided to truly discipline myself. I set a personal goal. I wanted to pay back my friend by Halloween. It was a good goal. It was long enough so that I could prepare and I eventually met it a month in advance!..
..Anyways I learned a few valuable lesson from this. If you are in debt, get out. Find a way to get out. Take control and plan. Plan all the way to the end. Don’t just save and not have the goal in mind. Another thing I learned is I can’t spend money I don’t have. When I walk out of my house, I take with me my wallet. In my wallet are some cash and my bank credit card. If I don’t have money in my bank account, I can’t spend it. Even if I am tempted to spend money on impulse, it would not be possible. The money would be in my Paypal account. You can’t spend money you don’t have access to.
I love the idea behind this method of paying down a debt, because it makes it harder for you to access the money you are setting aside (much like freezing your credit card so it’s harder to get to in order to make a purchase).
Essentially what Set is doing is transferring excess money each pay period into paypal in order to set aside money in a “Christmas Fund” of sorts to use for a purpose. This allows him to prevent immediate access to the money, and forces diligence on his part. An alternative method would be using SmartyPig or an additional ING Savings account for goal-oriented savings. I happen to use the ING method and it works out fantastic for me, though it still allows me to access that money immediately, so it would not be ideal for people who have less self-control when it comes to “excess money”.