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Cash Priority Plan: Put Your Money to Work Efficiently

Cash Priority Plan - Put Your Money to Work Efficiently

Imagine for a second that you receive a surprise $100. Maybe it is a gift, bonus, or money received from some work you did on the side.  Do you know what you are going to do with that money?

Would you pay down debt?  Or maybe even invest the money?

More than likely, if you are like most people, that money will be spent on whatever desire pops into their head without much thought of how the extra money fits into their overall plan.

It doesn’t need to be that way.

You can create a plan for “extra” money so when it hits your wallet, you already know what you plan to do with it.

When you get down into it, personal finance as a concept isn’t that difficult. It doesn’t matter if it is budgeting, saving, or investing, personal finance boils down to being intentional with your money. That includes all the money that comes into your life. It doesn’t matter if it is your normal paycheck or the birthday check you receive from your parents.

So how do you be more intentional when it comes to money you receive? Well, that is where a cash priority plan comes into play.

A Cash Priority Plan is the pre-determination and order of how you will utilize additional money before you actually receive it based on your goals.

So how does it work? Imagine that you have $10k in student loans that you want to pay off as soon as you can and a Roth IRA you hope to fund this year if your loans are paid off.  Your cash priority plan would look like this:

Cash Priority Plan - Example1

It is that simple.  With this simple plan, you have now established the expectation for yourself that any extra money that you receive will be applied in that order.

One thing that constantly trips people up when they receive extra money is that it is just that, extra. It is money they didn’t plan on so they want to use it to fund some of the things they have given up or pushed off.  Instead of using it to help with their goals, they want to use it to go out with friends or a road trip.

That is the beauty of utilizing a cash priority plan – you can build whatever you want into your plan.

Being intentional with your money doesn’t mean you can use money to enjoy things. It is just the opposite. Being intentional with your money helps you cut the shit out of your life so you are spending money on the things that provide you the biggest benefit and the most joy.

So, let’s take the example we used above.  You have $10k in student loans and want to fund a Roth IRA.  However, you also want to take a road trip this summer to visit some friends.  You can utilize your money plan to help save for this trip and keep the impact of your month to month progress on your goals to a minimum.

Cash Priority Plan - Example2

With one little addition, you are now allowing yourself to enjoy some of the extra money coming in, while still making progress on your goals.

When we were paying off our student loans, we utilized a cash utilization plan as well.  During our big push over the final 18 months of our loans, we utilized a plan similar to example #2 above. We wanted to travel a bit before we had kids while also wanting to get our student loans paid off.  So we used a money plans to dictate ahead of time how we would utilize additional funds that came in to achieve both of these items.

For every dollar that came in, 50% was put towards our travel fund (which eventually funded our trips to Sanibel Island, FL and St. Louis, MO) and applying the rest as payments to our student loans.

Now that we are past paying back our loans and no trips in the immediate future, our plan is mainly focused on savings.  It may change slightly from month to month depending on things we want to do but for the most part our cash priority plan is focused on various saving buckets.

Our Current Cash Utilization Plan:

Cash Priority Plan - My Plan

Taking the time to put together a plan before extra money comes in helps keep us intentional with our money decisions and help us not spend the money on something that isn’t important to us.

Want to Make Your Own?

Do you want to make your own cash priority list? Print out a blank plan and list out the order that money should be applied, according to your goals, when extra money is received. Hang it somewhere highly visible so you make sure you follow it!

Final Thoughts

Personal finance comes down to being intentional with your money. It doesn’t matter if that money is your normal paycheck, a side hustle, or a gift. A cash priority plan helps you be intentional for the money that comes in that you aren’t expecting.

Do you plan out how you will utilize money before you receive it? Have you ever used a cash priority plan?


  1. This is a very cool concept. And so easy! With just a little forethought one can avoid wasting a cash bump. We’re hoping to employ this tactic when we sell our home and downsize. If we can buy or build a new home for less than the sale price of our current home, we’ll use the surplus to fund a few of the more extensive trips we have planned in retirement.
    Mrs Groovy recently posted…What’s the Secret Formula for Choosing a Wedding Gift?My Profile

    • Thias Thias

      Awesome! It is good that you are already planning on how to put that money to good use!

  2. Great tip! Unfortunately I don’t think many people have a plan in place like this, so even when a small windfall comes into their lives they are not prepared for it, and usually spend it. We take extra money ans apply it to short or long term savings.
    Brian @ debt discipline recently posted…Could you Cover an Unexpected Bill in Cash?My Profile

    • Thias Thias

      Exactly Brian! If you don’t think about it, even a little bit, ahead of time, the chances of that money flying right out of your wallet goes up!

  3. I’m definitely one of those people who gets extra money, and then decides that I want to spend all of it on buying lunch at work instead of bringing my own. I recently had this problem when I was selling things on Craigslist. That being said, I’m done with useless spending! My cash priority plan is now: 1) emergency fund, 2) credit card debt, and 3) house down payment savings.

    Thank you for telling me about this & showing me that there are people out there who don’t waste their money!

    • Thias Thias

      Glad to hear you are putting more of a plan together! It is hard to not just spend extra money!

  4. What an excellent concept. When I receive extra money, I usually just add it to my checking account to be transferred to one of my savings goals. This way of thinking makes you be more intentional about every dollar. I would probably use the $100 to build my emergency fund further.
    Aliyyah @RichAndHappyBlog recently posted…Two Solid Reasons You Should Invest In StocksMy Profile

    • Thias Thias

      Exactly! While you can’t plan for everything, you should still try and be as intentional as you can!

  5. Love the concept. Anything that helps you devise a plan to spend your money in the best/most effective manner is okay in my book. Personally, when I receive surprise cash, I use it to buy the normal things I would typically swipe a credit card for versus increasing my spending habits. Okay, so I may grab an extra beer or two with my new found fortune. Bottom line is that for me, any unexpected cash allows me to transfer the equivalent amount of money to an investment account start earning some dividend income.

    Step 1 though….get that plan going. Great article!

    Dividend Diplomats recently posted…Lanny’s Recent Purchase – Target (TGT)My Profile

    • Thias Thias

      Nothing wrong with spending part of it – especially on a couple beers! Just don’t blow it all at the bar 🙂

  6. I like the simplicity, old A.E. would spend that $100 before the thought of saving, investing or paying down debt even had a chance to compete. Once I started doing calculations on how much extra payments would save me my mindset started to switch
    Apathy Ends recently posted…Actually SAVE Money you “Saved”My Profile

    • Thias Thias

      Glad to hear you are more intentional with how you would spend extra money AE!

  7. Great concept man. Simple yet very effective. The problem with these plans for the average person is what I will refer to as the “New Years Resolution’s Group” First month of the year they are ready to change their life and get that body/goal they set. After a month, or two at most, 95% stop with their goals. Personal finance comes down to commitment. If you cannot commit for the long run your wealth will suffer. Creating rewards along the way can help with this.

    On the plus side, every time I get extra money it goes straight into a fund for something or my savings. Recently got some money where 80% is going straight into investing (maybe when the market drops) and 20% is being stocked away in the emergency fund.
    Stefan – The Millennial Budget recently posted…Robinhood App Review: Commission Free TradesMy Profile

    • Thias Thias

      Good point Stefan! That is why I like the visual nature of this plan. Many times people commit to doing something but they don’t write it down and look at it often. Instead, the plan is in their head which slowly gets pushed out and they go back to being how they used to be.

    • Thias Thias

      Awesome! Can’t go wrong there!

  8. This is personal finance in a nutshell. Great way to break it down Thias. It takes the guesswork out of where your money should go and you can put everything on autopilot.

    My current priorities are maxing out all my tax advantaged retirement accounts, putting the rest towards student loans and then 10% into a savings account.

    • Thias Thias

      Not a bad plan at all Syed!

  9. Great idea! It is amazing that a lot of people’s priorities fly out the window when it comes to the extra money. If you were to get a raise at work you would likely reallocate that money to reach your goals faster, so if you get it up front in the form of a bonus or a gift it is even better. I have interest in saving interest!
    Scott @ Couple of Sense recently posted…Relationship + Money – Should Only One Control?My Profile

    • Thias Thias

      I know I use to see extra money as stuff I didn’t account for so I felt I was “free” to do whatever I wanted with it. I’m glad I have come around and now put it to work for me!

  10. This is a really good idea. We usually just throw it into our savings or checking account with no real plan for it. We figured as long as we weren’t intentionally spending it and put it away for savings we were doing good, but I never considered I hierarchical plan that would help us with multiple different goals. I’ll be taking this to heart, thanks!

    • Thias Thias

      At least you weren’t spending it! I’m sure when it hit your savings or checking it eventually made its way to one of your goals – This just helps speed it up 🙂

  11. “Being intentional with your money helps you cut the shit out of your life so you are spending money on the things that provide you the biggest benefit and the most joy.” I love that quote, it definitely belongs in a book with other wise quotes from great thinkers :).

    • Thias Thias

      Haha Thanks Norman! Appreciate it!

  12. Love the idea of a cash priority plan. For me personally I use any extra money I get, whether it be a bonus or birthday money, to buy dividend paying stocks. I have a separate stocks and shares account for this. So whilst I invest the initial money I receive, I give myself the choice of using the dividends in any way I choose. This method has been great to me as I keep getting more and more extra money by the year.
    Money Grower UK recently posted…AstraZeneca (AZN) Stock Purchase – The perfect Brexit stockMy Profile

    • Thias Thias

      And you give yourself the gift that keeps on giving – regular dividend payments!

  13. What a great idea! Definitely going to have to create my own list, and then find ways of receiving some extra money once in a while!

    • Thias Thias

      I agree – the list doesn’t work well if no extra money is coming in – Now to get back to those side hustles 🙂

  14. Francesca - From Pennies to Pounds Francesca - From Pennies to Pounds

    This is a great idea! It’s so easy to spend extra money on a luxury.

  15. This is a really good idea for people to follow! I do my own twist by creating a list of goals I have for the year (which often include different debts we want to pay down). Once a year, my wife and I will look at the list over some coffee and decide which ones have the biggest priority. From there, its game on all year to try to whittle down our expenses and figure out how we’re going to make the goals fit into our budgets and lives.

    • Thias Thias

      That is a great way to do it! Do you review the list throughout the year or is it just at the beginning and end?

  16. I am similar. All non-enormous unplanned for money is allocated based on previous ZJ’s ideas of what is needed.

    If CC debt, that first. Then IRA, until funded. Downpayment for condo and then taxable investments and student loans.
    ZJ Thorne recently posted…My Frugal DIY Face RoutineMy Profile

    • Thias Thias

      Great list ZJ!

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