MONEY MANAGEMENT

 

money management

Regardless of how much (or little) you know about investments, stock markets, credit cards, and insurance, your financial planning is most likely to fail if you don't have a firm grasp of your money. Hence, having a solid understanding of your finances, or your financial situation, and being able to manage them intelligently, is the most crucial stage in financial planning.

So, what is your financial situation?

1) Earnings and Expenses: Your expenses matter more than earnings when it comes to determining how much money you have on hand after meeting your needs and wants. You must create a 'balance' between your spending and earning patterns if you want to be in a better financial state. Creating a ‘balance’ between your earning and spending patterns will create a benchmark for planning your finances.

Normally, a healthy bank balance at the end of the month indicates a trend towards a good financial position, and a zero or negative bank balance at the end of most months corresponds to a weak financial trend.

2) Assets and Liabilities: Your financial status now and in the future will determine how many valuable assets you possess. For example, assets like investments—in gold or silver, deposits, stocks, mutual funds, art or antiques, land, etc.- will add to your income (either now or in the future) or minimize expenses. Hence, assets play a crucial role in strengthening your financial position. On the other hand, liabilities weaken your financial position. Debt is something that you owe as a liability, which also impacts negatively on your assets, just like an old vehicle that needs a lot of fuel and repairs for the work it is doing.

There are four key areas of your financial situation are:

1. Income

2. Expenses

 3. Assets, and

4. Liabilities.

Conclusion:  The right mix of these four key areas be used for money management for a better financial future?

1. Keep a Record: Keep a meticulous record of every penny coming in and going out in your diary, excel, or any place of your choice.

2. Monthly Budget: Get into the habit of making a budget to put your money to optimum use. A budget will help you reduce liabilities, spend wisely, save, and invest.

3. Regular Savings: for future goals, to be able to face financial emergencies, and build assets.

Hence, regardless of your income, your ability to handle the four major areas will determine how strong, secure, and stable your financial situation is.

Location: India

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