Description: Money management is the procedure of budgeting, investing, monitoring taxes of one’s money that is also known as financial management. It involves the collection, storage and allocation of funds for meeting current and future requirements. Managers use money management to plan how to best use their funds. With a sound money management policy, companies can maximize their profitability and reduce the risk of financial loss. This form of management is most effective in corporate finance, planning for retirement, building wealth for retirement, and purchasing needed assets such as infrastructure.
The importance of managing finances soundly starts in childhood. From young children to teens, everyone should be taught financial responsibility. Developing financial goals and planning accordingly will aid in ensuring that a person’s monetary situation is taken care of. A solid money management system will help them achieve these financial goals.
Two distinct forms of money management exist: discretionary and mandatory. Def discretionary funding is set aside for unexpected expenses or for a future contingency plan. This type of budgeting is best done when saving for an emergency is not likely, because the money saved can then be used for investing or saving for the same purpose. Examples of expenses that are included in discretionary budgeting are medical payments, home repairs, and paying for an extended holiday. Mandatory funding is set aside based on income to be used for saving or for debt repayment.
Money management is also reflected in your behavior. The kind of purchases you make reflects how much you have saved or how much you are spending. Money saving through efficient budgeting practices is much more effective than spending sprees. Encourage family members to be more financially responsible by helping to set aside some money each month for saving. If all members do this, money management is made easier through budgeting.
A good financial plan reflects your perception of your finances and your view of your long term goals. Financial experts suggest that a good financial plan must include aspects such as saving for a rainy day, protecting your credit score, and saving for a college education. When your assets, such as real estate or your paycheck, are already protected in a savings account, it is easy to know how much money you will need for unexpected expenses or for your future.
It is possible to learn about and practice better money management. In fact, most people who want to save a little extra money actually do save. In order to learn more about the best ways to manage your finances, you can start with a free online budget sheet, then invite over a family member, neighbor, or friend to sit down and go over your financial statements. This step is particularly important because it helps you get in the habit of regularly reviewing your finances and making changes where needed to achieve your financial goals.