Make Your Nut is an interesting blog that I've been reading recently, and has a great post on compartmentalizing your finances. This is a topic that really resonates with me, as it is such a big factor in the progress that I have made in reducing my debts and building some basic savings.
I've written quite a bit about the value of having a Freedom Account, where you save up over time for irregular expenses such as vehicle service and holiday gifts. This is a perfect example of the kind of compartmentalization that can lead to healthy finances: "I know I can afford to spend exactly $X on Christmas gifts, because that's how much I have saved up."
I think everyone who has made an effort to clean up their finances has probably had a moment when they just knew they were on the right track. For me, this happened last week when I had to take my car in for repairs, and the bill came to almost exactly the amount I had saved up for car repairs. Being able to pay cash for substantial repairs was a huge motivation in "staying the course" with my financial plan, and it was possible because I have compartmentalized my finances.
That's not to say that my compartments will remain static over time, but the basic approach of creating compartments will always be a key component of the way I manage my money.