The Income Management System (A Budget That Won’t Fail!)

Using an easy-to-follow, structured budgeting system is one of the most important aspects of financial planning and income management. It is the key to becoming financially independent, yet it is a tactic that very few people implement or master.

The key to wealth creation is strategic spending. Most of us know how much we earn each year, but we have no idea what we actually spend the money on. Like every successful business, we need to constantly monitor income, expenditure, and cash flow while also ensuring that we make a profit (i.e., save money).

Creating The right environment

I created a strategic spending system which has worked successfully for my clients when I was a practicing financial planner and I use it daily to manage the family income. The basic approach in the system is to divide your hard earned income into at least three small, easily controlled “bundles:”

Bundle 1: The Wealth Account

Savings, which we will call your Wealth Account. Pay yourself first. At a minimum, this is made up of 10% of your gross pay, transferred monthly into a cash management account (If you leave savings to what’s left over, you will always find that there is nothing left!). In addition to your savings which go into a highest interest earning bank account, you should also put in enough funds to cover all your tax deductible expenses. This will save time and effort for your accountant when preparing tax returns.

Bundle 2: The Cash Account

Cash Account/s that covers living expenses, all non-deductible items, for which you normally pay cash (a bit like pocket money). This account/s is accessed by a 24-hour access keycard.

Bundle 3: The Operations Account

Operations Account, for larger sums or regular bills are usually paid monthly, quarterly or yearly. It is wise to use this account in conjunction with a credit card for those occasions when your monthly expenses are higher than the budgeted amount. The card acts as a smoother as next month will be a surplus that can be paid back into the credit card.

These “bundles” are linked by a Transfer Account into which your pay is banked. Automatic transfers or payments are set up to move funds to all the accounts on the pay day of each month(assuming you get paid monthly)

You should maintain a small float in the Cash and Operations Accounts. Because your Operations Account must not be accessible with your Cash Account keycard, do not link these two accounts.

The objective of this system is to accumulate as much as possible in the cash management account (part of your Wealth Account) and use these funds wisely to create extra passive income or capital growth through a side hustle or other investment strategies using shares, property, crypto or other assets as outlined on Budget Gorilla.

The Income Management System

Your Strategic Spending

Now that you have your accounts setup and your mind focused on your strategic Spending System you must now plan, track and follow your budget. This is all done on a budget planner.

How you design and use your budget will help or hinder your process.  To save you time and to make sure you get it right, you can download one that we use. It is preprogrammed to make the right calculations; all you need to do is fill in your data.

Here is a breakdown of each section of the spreadsheet/planner to help you fill it out.

Part A. is all income (e.g, employment income, business income, investment income). This is “net” income, after withholding and/or business expenses. This is the amount that goes into your Transfer Account, where income is accumulated and dispatched to the three Strategic Spending Accounts.

Part B is your Wealth Account.  Automatically move 10% of your gross (pre-tax) income into your Cash Management (Savings) Account from your Transfer Account.  This 10% allocation should be given priority above the oother two accounts. Remember, if you leave savings to what’s left over, you will always find that there is nothing left.

Part C1 corresponds to your Cash Account which is for all non-deductible items and daily living expenses for which you pay cash. This account should have a set amount deposited every month (in this example, $655 per month).

Part C2 through 7 are the larger periodic expenses that are paid from your Operations Account. These have been grouped on the spreadsheet into Housing, Transport, Medical, Loans, Holiday and Other.

Total expenses are automatically calculated at the bottom of this portion of the spreadsheet.

The final section of the sheet is a summary, as in this example.

Why this budget will work for you

This budgeting system will work, due to its automation. With the current modern banking system, it is easy to set up the 3 bundle amounts as automatic payments.

This will eliminate the need to do everything yourself. Although, it’s a good idea to check that the payments have gone through correctly each month.

What to do if your budget is in the negative

If you find yourself in the negative after budgeting for the month, don’t despair! There are a few things you can do to get your finances back on track. First, take a look at your budget and see where you can cut back. Maybe you can eating out less or cutting back on your entertainment budget. Second, make sure you’re not overspending in any one area. It’s easy to do if you’re not paying attention, but it can really add up! Third, consider ways to increase your income. Check out this great resource on making extra cash through side gigs.

If you’re struggling to make ends meet, there are plenty of resources out there to help you get back on track. With a little effort, you can get your budget back in the black in no time!

Stick with this plan long enough to see results

Creating a budget that works often involves some trial and error. However, this system has worked for many people and it should work for you too.

To figure out whether you have a good personal finance plan, set aside some time to reach two short-term financial objectives. If you haven’t achieved these goals by around 90 days, then adjust your plan until you get the results you’re looking for.


One of the best things you can do for yourself and/or your family is to create a budget. It will help you understand where your money goes and what you can do to reach your financial goals. It provides you with a roadmap for your finances, and can help you make better spending decisions.

The strategic spending budget described in this article is a great way to get started onto a path of better money management.

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