It’s the end of the month: Do you know where your money is?  If your answer is no, then you probably need to create a personal cash flow management system. Meaning, a system that effectively manages what you do with your money each month.  I’m not just talking about having a spending plan, but a plan for actually managing how you use the cash that comes in the door each month.

Sounds glamorous, right? While we’re not talking about your next Caribbean vacation, we are talking about living the life you want. A highly effective cash flow management system is the most foundational, yet overlooked part of your financial life. It ensures that your spending is aligned with your present-day priorities and future goals—all while using the least amount of mental space every month.

Start by asking yourself if you have some kind of system already in place. Maybe you’re managing your money without even realizing it. If this is not the case, you may just be burning through your monthly cash without much thought. In other words, are you a person who has money left over each month in your checking account, or someone who anxiously awaits your next paycheck?

Either way, setting up a clearly defined system is exactly what you need to have confidence in managing your money. But don’t confuse this with simply having a budget or cutting spending; personal cash flow management is recognizing the relationship and timing between your hard-earned dollars, expenses, and savings.

Here are a few pointers to help you with your personal cash flow management system:

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Have a personal spending plan

Your fixed expenses are just that – predictable and fixed. So try to create some parameters for how you want to spend your money. Spend time understanding if those fixed expenses conflict with other goals like saving or paying down debt.

Read: The Real Purpose of a Personal Budget

Map out your cash flow

Begin with a spreadsheet or a blank sheet of paper for each pay period, and list what that pay period needs to cover. This should include things like mortgage, rent, utilities, and food.  Learn more about the nuts and bolts here.

Allocate money in each pay period

If you get paid twice a month, figure out which paycheck is used for which expenses. If your first paycheck of the month goes to mortgage and personal expenses, then make sure your second paycheck funds all your savings and other expenses.

Identify your spending methods

Do you pay for all your expenses in cash? On a credit card? On 5 credit cards? If it’s the last one, we may need to devote a future post to corralling a credit card problem. But in the meantime, having your expenses paid out of one source helps simplify your life. Try to do all your spending from one account or one credit card, and pay it off religiously each month.

Automate, automate, automate!

I can’t stress this enough as the secret to helping you stay on track. Automating your bills and savings makes your system foolproof. Automation will give you the peace of mind knowing that you’re taking care of your obligations on time every month. This is seriously a no-brainer.

I see a lot of clients get frustrated with setting up a personal cash flow management system. Don’t worry, the frustration is normal. I always tell my clients that it takes time to figure out a system that works best for them. Once you do, it will be the financial foundation from which all things flow, and flow easily.

If you have an interest in financial planning or any questions, please reach out.