Money Management or investment management as it is also called is the process by which a person can track expenses, investments, budgeting, banking, and taxation of one’s money.
In other words, it refers to how you handle all aspects of your financial transactions and is a technique to create the highest return from the money that has been spent by you. People spend money to satisfy their desires and this is a natural behavior.
This process of money management has been developed primarily to reduce spending by individuals, companies, and organizations on anything that does not contribute much to their standards of living, long term investments, and assets. The rich who have made their fortune in investment portfolios have advocated the idea of frugality. Without good money management skills, your life will not be able to meet the success that you desire.
Knowing your worth
Efficient money management requires you to know what your worth is in terms of money. These could include your assets, which are the things you own, and liabilities, the money that you owe others. Your assets include the cash that you have on hand, the amounts held by you in banks, your investments, these could be your investments in other institutions, your retirement benefits, and the property that you own like your house, and also land. Your liabilities include the money that you owe others and they include your loans, credit card balances, mortgage, and other debts.
When your assets are more than your liabilities your growth is positive and it shows that you have managed your money well. On the other hand, if your liabilities are more than your assets it shows negative growth. Only good money management will reverse that trend.
How do you correct this situation?
The best way is to set goals in your life. Goals trigger you to manage your money judiciously. Generally, people live to satisfy their short term goals. Electricity bills, rents, payments towards purchases, and other loans take priority. This activity is a continuous process and you tend to lose sight of the big picture, the picture that will tell you where you should be in, say the next 10 years from now.
When you set long term goals, you have to cut out unnecessary spending. This takes a lot of effort and planning, and with a lot of commitment and determination, you will be able to achieve it.
Money management requires one to be always aware of one’s long-term goals. This will set the path to a better life. Ben Soifer has been providing valuable tips to people to manage their money.