The importance of establishing your cashflow in your 20’s

10th of January, 2023

Your 20’s can be a busy time, from trying to find your place in the world, getting to know who you really are and starting to put the framework in place for your future.

Whether you have decided to actively consider your finances through this period or to leave them as a problem for “future me”, the fact remains that your finances are in a state of either growth, stagnation or decline.  

Luckily, I learnt from a young age that I could use compounding interest to my advantage and how important it was to be on top of my cashflow.

Unfortunately, I would be lying if I told you that I had a sophisticated spreadsheet and detailed plan to keep my savings in order, the truth is rather simple: after receiving each pay cheque I would transfer a portion of that money to a separate bank account. This account has no debit card or apple pay so spending that money became a two-step process that encouraged me to leave that money alone.

Some months I may have saved more than others, we all know how expensive the holiday months can be, over time however, I was able to accumulate a small but substantial bank of money. Investing came along further down the line but being but the process of squirreling that money aside held me in good stead for when that time came.   

Here is a slightly more sophisticated way to go about it: 

  1. Work out how much money you make – This step is pretty easy for most of us just take a look at your last paycheck. If your income varies take a larger snapshot for example how much you made in the last year and divide it by 12 to work out your average monthly income.
  2. Next how much roughly do you spend – The money smart website has a great resource that helps you work through your fixed and varied costs to work out your average expenses.
  3. Create a budget – now you know what your expenses and income is you know how much extra surplus income you have each month (your income minus your fixed expenses). From your surplus income you can decide a target to save each month.  

You might be saving to build up money for a holiday, to buy your first car, to invest or a number of other things but the ability and skill of saving is very important. It’s something many people never really learn.  

Being able to save means you have extra money to give you choices down the track. It also means you can think about investing and starting to build your foundation portfolio so one day you can have enough passive income to fund your lifestyle. There is also some security in having some money put aside, incase of an emergency. It means you can afford options you might not have been able to otherwise.   

Saving sounds boring and isn’t as exciting as what you might be able to buy with that money right now, but with all things that require delayed gratification, the benefits are well worth it down the track. 


Disclaimer: Any opinions or recommendations expressed here do not purport to Financial Advice but rather should be considered General Advice and does not take into account your personal needs and objectives or your financial circumstances. You should therefore consider these matters yourself before deciding whether the advice is appropriate to you and whether you should act upon it. Should Financial Advice be sought, we suggest you seek such advice from an appropriately qualified advisor. Any growth rates, yields, rental income, tax rates, interest rates, depreciation rates, inflation rates Dividends per Share (DPS) and Earning Per Share (EPS) etc shown are estimates only and should not be used as a guide to future performance. Past performance is not necessarily a guide to future performance and should not be relied upon for this purpose. Authorised Representative of PGW Financial Services Pty Ltd – AFSL 384713 ABN 15 123 835 441.