Part of the value of building out a complete financial plan for yourself is that in doing so, you create a process for moving from where you are right now to where you want to be in the future.

What actually moves you from Point A to Point B? The smart, strategic, intentional actions you take. And what makes it easier for you to take those actions?

A personal finance system — or systems — that support you along the way.

Here are 3 fundamental systems that, once in place, will help you make huge leaps forward on your path to what you want in life:

Personal Finance System 1: Cash Flow Management

…which is a fancy way of saying “budget.”

“Cash flow management” tends to sound just a tad more appealing to most people, because no matter how much you hear that “budget isn’t a bad word”… it still kind of is. Or it feels like it, anyway.

It can feel restrictive. Like a place where fun and joy go to die.

That’s why I focus on cash flow spreadsheets as my clients’ financial foundations rather than a rigid budget, because budgets often are strict and unbending — whereas we know life is extremely fluid and flexible.

Your system for organizing the flow of money in and out of your accounts should be just as flexible.

The cash flow spreadsheet allows you to be more fluid with your money while understanding what’s coming in (your income), what’s going out (your spending, expenses, and contributions to savings and investments), and what’s taking up your available funds.

Your cash flow, and the tools you use to manage it, is the key building block to financial success. Without it, you’re not building much — and you certainly won’t be able to start stacking Benjamins to great heights anytime soon.

Yes, it’s basic. But it’s critical. You need some sort of cash flow management system.

Here’s what I use in my own life:

• The same financial planning software I use for my clients. (See that big orange “Client Login” button in the upper right-hand corner of this page? That’s the one.) This system aggregates all your financial data, from checking and savings to credit cards to investment accounts. It can then automatically track all your transactions and money moves as you make them, which makes it really easy to understand your cash flow and track your net worth over time.This software does a ton of other amazing things, too, and is a critical tool in understanding the impact of financial choices, and their long-term payoffs or consequences.
• A very plain spreadsheet. In addition to the financial planning software, we use a very plain, humble, low-tech spreadsheet to keep track of income, expenses, spending, and savings. Why? Because it’s always good to have a simple backup to verify the high-tech solution is actually working and accurate. My wife, Kali, logs every single transaction we make into the spreadsheet. We pull up the sheet and review it together a few times a month, and once a month we sit down and look at everything in our financial lives (that meeting takes an hour or two most months).The spreadsheet is an extremely manual process and it takes a lot of time and energy to maintain. Personally, we both like this as we like to be extremely involved in our finances. But you might be more of a set-it-and-forget it person. If that’s the case, finding an automated cash flow system might make more sense for you. You could try You Need a Budget or Mint to see if that better suits your style.

But wait a second — You Need a Budget? Didn’t we already decide that was a bad word?

Traditional budgets aren’t much fun, but that doesn’t mean you have to do what everyone else is doing. Here’s our approach to managing our cash flow without driving ourselves insane (or feeling deprived) because our “budget” sucks:

1. We look at our income for the month (after accounting for taxes and business expenses). We want to see the total available cash for the next 30 days.
2. We allocate money to savings goals. Right now, this includes maxing out HSAs, funding our SEPs, investing in a brokerage account, and setting aside some cash for travel and a new car purchase.
3. Then, we look at our fixed expenses and allocate money toward them. That includes: rent, utilities, internet, and insurance (if we didn’t both own our own businesses, it would include cell phones as well, but those bills are filed under business expenses).
4. We put more money to savings. We have a targeted “discretionary spending” amount for each month. If we have more than that available after steps 1-3, then we take the extra and put it toward investments.
5. Finally, we spend. Whatever is left over is available to spend freely on what we want — but it must cover everything from costs like groceries and home supplies to money spent on meals out and entertainment. (This offers us a ton of flexibility since we get to choose what we spend on; but we must accept the responsibility of knowing we only have a certain amount to go around. We need to choose our purchases wisely.)

This is a numbered list for a reason: we take these steps in this order. That means saving and investing money is the top priority for us. Then we look at what we’re obligated to spend each month, or our fixed costs.

Personal Finance System 2: Savings Prioritization

This actually takes us to the second system you can use to improve your financial situation: prioritize your savings.

Again, after taxes and business expenses are accounted for, the next move we make is to send enough money to savings to meet our annual goals.

We do this even before worrying about paying rent or bills. That’s how important savings is. If we need to sacrifice something to make room for our expenses, it will be our discretionary or “fun” spending — not fixed costs or savings.

(Important side note: I understand this may not be realistic for everyone. Kali and I both have experienced years where the question of “can I pay rent if I buy groceries right now?” was very real. For the most part, when I write this blog, I’m speaking to folks who earn enough money to both spend and save as that’s where I feel like I can add the most value.)

After we allocate money to fixed living costs, we go back to focusing on savings.

We know about how much we spend in a normal month. If we have more than that amount available after accounting for savings/investments and expenses, then about 75% of the time we grab the extra cash and put it in an investment account.

(The other 25%? Sometimes we do choose to spend the extra instead. It usually goes toward buying tickets to events, going on a day trip or long weekend excursion, or toward buying a one-time purchase that is more of a “want” than a need.)

Whatever is left is available to spend throughout the month on whatever we want. There’s just one rule: when the money is gone, it’s gone.

This is the cash flow management system we use, and the method we use to prioritize our savings. Many of my clients do things differently (either using their financial website they get access through as a BYH client, or using something like Mint).

The specific system here isn’t as important as having a system to:

• Account for your income
• Track your expenses
• Organize your transactions
• Understand how much money you make, how much money you spend, how much you save, and where that money goes

Personal Finance System 3: Automate Everything (That You Possibly Can)

Both personal finance system 1 and 2 will help you make massive leaps forward (over not having them) in your journey to creating a full, satisfying life with money as your tool.

But without this 3rd system, they do expose you to a lot of risk via human error.

Here’s what I mean: if you manually try to manage these processes and systems, you’re going to run into a number of problems:

• You’ll forget to pay attention sometimes
• You won’t want to pay attention
• You’ll be tempted to make a ton of choices outside of “save this money” or “invest that money” — i.e., you’ll be confronted with the temptation of “hey spend this cash on stuff and things you want right now instead of putting it aside for Future You”
• You might find yourself suffering from decision fatigue and start making bad choices or stupid mistakes that you later regret

Sounds like quite the number of pitfalls to avoid, right?

Thankfully, you can avoid most of these with personal finance system 3: automation.

Automate everything you can so you can stop thinking about it. Much of the time when it comes to personal finance, the more you think through things, the more trouble you can get yourself into.

Here’s a flow of how you could automate a lot of your financial decision-making:

• Automatically contribute a certain percentage of your salary to your 401(k) or employer sponsored retirement plan (at least enough to get the match, but you might strive for maxing out this account if you can).
• Automatically transfer your take-home pay to your checking account via direct deposit.
• Automatically contribute to savings and investment accounts by setting up automated transfers to the appropriate places (savings accounts for goals; brokerage accounts for investments; etc).
• Automatically pay bills and credit cards with auto bill pay (just make sure to double-check statements to ensure they’re accurate).
• Automatically monitor transactions and spending with an account aggregator (like the tool my clients get through BYH, or something like Mint).

You can automate even more — like the management of all these tasks (which is still important even after you set them to auto-pilot), your financial planning, and your investment management, including rebalancing, ensuring your asset allocation stays in line with your goals and needs — via outsourcing to experts like fee-only financial planners.

Put together, these and other personal finance systems will allow you to create a smooth-running process that moves you along on the path to creating wealth.

The point of all this? It’s not just to create that wealth. It’s to enjoy what’s important to you once you have the money to underwrite those things.

When you build your wealth, you’re building freedom. You’re making work something that’s optional rather than required. And you’re giving yourself more choice and flexibility in how you spend your time.