Succussful Money Management
"Each month I have too much month and not enough money. If the month were only 20 days long. budgeting would be easy'" Most of us haye heard a comment like this when it comes to budgeting and money management.
Your daily spending and saying decision, arc at the center of financial planning. You must coordinate these decisions with your need". goals. and personal situation. When people watch a baseball or football game. the) u"ually know the score. In financial planning. knowing the score is also important. Maintaining financial records and planning your spending are essential to successful personal financial management. The time and effort you devote to these recordkeeping activities will yield benefits. Money management refers to the day-to-day financial acti\ ities necessary to manage current personal economic resources while working toward long-term financial security.
Opportunity Cost and Money Management
Consumers can choose from more than 25.000 itcms in a supermarket. from more than 11,000 periodicals. and from as many as 500 cable television stations. Daily decision making is a fact of life. and trade-offs are as"ociated with each choice made. Selecting an alternative means you give up something else. In terms of money management decisions, examples of trade-off situations. or opportunity costs, include the following:
Spending money on current living expenses reduces the amount you can use for saving and investing for long-term financial security.
Saving and investing for the future reduce the amount you can spend now. Buying on credit results in payments later and a reduction in the amount of future income available for spending.
Using savings for purchases results in lost interest earnings and an inability to use savings for other purposes.
Comparison shopping can save you monel and improve the quality of your purchases but uses up something of valuc you cannot replace: your time.
As you develop and implement various mone) management activities, you need to assess financial and personal costs and benefits associated with financial decisions.
Components of Money Management
Personal financial records and documents are the foundation of systematic resource use. They provide written evidence of business transactions. ownershjp of property, and legal matters. Personal financial statements enable you to measure and assess your financial position and progress. Your spending plan. or budget. is the basis for effective money management.
