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Better Cash Flow Management

Updated: Feb 12, 2020

Budgets are so blah! So how should you effectively manage your cash flow without sending yourself into a spin? There are many books and principles you can follow but one that I use and suggest is the 70/20/10 principle.


Can you imagine the reaction I get if I tell people to stop buying their morning coffee each day? I don’t want to tell people what they can and can’t spend their money on, so this method suits the purpose. Now let me remind you of my favourite mantra “spend less than you earn” before we get into the operations of the 70/20/10 principle.

70% - Let’s call it Now Money

Now money represents the money you can use for immediate expenses each month. This could be mortgage repayments, groceries, school fees, clothing, coffee, gym fees etc. Let’s say you earn $7,000 per month, then $4,900 is going to these everyday expenses. Complete your budget with all your monthly expenses and see if 70% covers these items. If it doesn’t, you will need to make some adjustments within this category.

20% - Later Money

Later money is your savings for short terms goals such as a holiday, wedding, new car etc. Those big-ticket items that take some time to achieve. A handy tip is to rename your bank account to align with the goal, such as “Tanya’s trip to Italy”. This is so much more inspiring and motivating and may cause you to pause before transferring funds FROM this account in a weak moment. Using our above example, we would have $1400 per month going into this account.

10% - Future Money

Future money is going to form your buffer for unexpected expenses as well as long term savings. Depending on your life stage, you should consider how best to maximise this money’s chance of growing over time. Using our example above $700 per month is going into this account. Make sure you have a separate account for your Later money and your Future Money so that the goals and purpose do not blur.

Everyone’s needs are different and you may be able to change the % allocations to suit you but the principle helps you focus and plan. Now, about those coffees $4 a day (weekdays) is $960 a year... just sayin’.

This information contained in this document has been provided as general advice only. The contents of this document have been prepared without taking account of your personal objectives, financial situation or needs. You should, before making any decision regarding any information, strategies or products mentioned in this document, consult with your GPS Wealth Ltd financial adviser to consider whether it is appropriate having regard to your own objectives, financial situation and needs


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