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Published on 20 Oct, 2023
T. Harv Eker, the author of the book ‘Secrets of the Millionaire mind’ has said: 
“The single biggest difference between financial success and financial failure is how well you manage your money.”
In today’s newsletter I will walk you through the 5-Step Process I use to manage our money. 

Step 1: Determine your Income vs Fixed Expenses


Step 2: Align Bank Accounts with Financial Goals


Step 3: Allocate Money to Bank Accounts


Step 4: Track your Net Worth

Step 5: Review Income vs Expenses
This process has been the backbone to our financial success to date and has helped us grow our Net Worth to $750,000.
Let’s dive in. 
Step 1: Determine your Income vs ‘Fixed Expenses’
Do you know how much it costs to run your life per month?
This is one of the most important numbers to understand.
Without this number it makes the rest of your money management system challenging to work out.

Your ‘fixed’ or ‘recurring’ expenses are things such as:

  • Housing costs
  • Vehicle costs
  • Food & groceries
  • Insurances
  • Subscriptions
Below is an example of what this looks like using my ‘Money Management Blueprint’.
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In this example we can see that the ‘fixed expenses’ per month are $4,788.55 – which is how much it costs this couple to run their life per month. 

This table also gives us two more important numbers that will help with the following steps:

  1. What’s leftover each month (income – expenses)
  2. What % of income is required to cover ‘Everyday Living’ expenses
Step 2: Align Bank Accounts with Financial Goals
I believe our bank accounts should represent our financial goals or priorities.
If you look at your bank accounts right now, what does that tell you about your financial goals or priorities? 
One of the most valuable exercises I do with my clients is to draw out their current money management system with them on a piece of paper.

This helps us:

  1. Visually understand their current system
  2. Work out the gaps in their current system
  3. Create a new system that’s aligned with their goals
Here is an example of an unpack I did with a couple earlier this year:
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Once we understand our current system and our financial goals then we can make changes to align our system with our goals

This often means:

  1. Opening up new bank accounts
  2. Removing existing bank accounts
  3. Repurposing existing bank accounts
  4. Changing how the money flows within the system
  5. Changing the names of our bank accounts to reflect our goals
The language we give our bank accounts is important. 
Rather than leaving our bank accounts called a ‘transaction account’ or ‘savings account’, we can change the name of our accounts to reflect our goals. 
It’s important that the names have meaning for you.
I often talk to people who have replicated the ‘Barefoot Bucket’ system. But they always seem to struggle to implement it or they don’t use it as Barefoot recommends. 

This is partly because:

  1. That system does not align with their goal or priorities
  2. The language of the Barefoot buckets do not have meaning for them
Step 3: Allocate Money to Bank Accounts
Once we’ve set up our system to align with our goals, it’s time to put the system into practice. 
There is no one-size-fits-all scenario here.

Your allocations will be influenced by:

  1. Your most important priorities
  2. How much you have leftover after ‘fixed’ expenses
  3. Whether you earn ‘fixed’ or ‘variable’ income
  4. Whether you earn ‘employee’ or ‘business’ income (or both like us)
Your allocations can be automated or done manually. 
And they can be allocated weekly, fortnightly or monthly depending on your cash flow situation.
If you earn consistent income each month your system can be easily automated. This is how I used to have our system setup when I was working as an employee. 
If you earn variable income then some manual intervention is required. 
My business income can fluctuate quite a bit month to month so I manage our allocations manually.  
This is what our current setup looks like:
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At the end of each month I manually allocate all of the accumulated money for the month from the ‘INCOME’ business account to the other accounts in set percentages. 
Since Kaci has been on maternity leave, our allocations have had to change. And month to month we don’t always get to allocate money to all these accounts listed above.

But we do have two non-negotiables:

  1. 10% of every dollar (after GST) from the INCOME account goes towards ‘investing’
  2. 5% of every dollar (after GST) from the INCOME account goes towards ‘giving’
Even in months where our expenses have exceeded our income, I still make sure we continue to invest and give in these percentages. 
Step 4: Track your Net Worth
One of the most important numbers to measure and track is your ‘Net Worth’.
Your Net Worth is a snapshot in time of your financial health. 
It’s simply ‘what you own’ minus ‘what you owe’
By understanding your Net Worth and tracking it once per month you will put yourself ahead of the pack. 
This habit is simple, yet powerful
We measure and track what we care about. 
And what we care about grows.

By building this habit I guarantee your Net Worth will grow! 

Our Net Worth has more than DOUBLED over the past three years.

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Step 5: Review your Income vs Expenses
The final step of my process is to review our ‘income vs expenses’ for the month.

This is different from step one where we worked out our ‘income vs fixed expenses’.

In this step we work out our ‘actuals’ for the month:

  1. How much money came in, vs
  2. How much money came out
This is the most time consuming part of my process, but it’s the most important. 
This gives us a complete understanding of where all our money is going.
And it gives us immediate feedback if we need to make some changes. 

For this step I simply:

  1. Open up my banking apps on my phone
  2. Filter for ‘incomings’ or ‘outgoings’ for the previous month
  3. Enter the data into my ‘Money Management Blueprint’
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This is a snapshot from our ‘Personal Income vs Expenses Review’ for the past three months. 

This 5-Step Process has been pivotal in helping me manage our money and grow our Net Worth.

Is it perfect? 


No, and it never will be.

But it works for us. 

The best money management system is the one that works for YOU.

Big Love,


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Financial Habits Mentor & Host of the Podcast 'Money Mastery with Marshy.


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