Cash Management Account

The foundation of our system is strategic spending. Most of us know how much we earn each year, but have no idea what we spend the money on. Like every successful business, we need to constantly monitor income and expenditure while also ensuring that we are making a profit, in other words, saving some money.

The idea of a strategic spending is to divide your hard earned income up into small, easily controlled bundles. The first bundle taken out should be savings, a minimum 10% of your gross pay, which is transferred monthly into your cash management account. If you leave savings to what is left over, you will always find that there is nothing left over.

The second bundle is your cash management account. This is your daily living expenses for which you normally pay cash, a bit like your pocket money. These are for all non-deductible items. This account is simply accessed by a 24 hour access keycard.

The third bundle is your operations account. This is for those larger amounts which are usually paid monthly, quarterly or yearly by cheque. This account should not be linked to the cash management account (so you cannot access it with your cash management account keycard). We keep the bundles separate. 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.

The system is linked by the use of the transfer account, into which your pay is banked. From there, periodic payments are set up to transfer funds to all the accounts on the 15th of each month. You should maintain a small float in the cash management account and operations account. The main aim is to accumulate as much as possible in the cash management account and use these funds wisely to create wealth.

Author: Greg Dempsey Investor/Marketer Amargo Blog40332
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