When you were a bit younger and had to bug the folks for a little extra cash on the weekends, you probably also had to listen to them harping about how you needed to manage your money. Now that you’re rolling in dough from your dream job (or, at least, making a decent wage at last), your friends are telling you that you need to manage your money. So what does money management mean, exactly?
In a Nutshell
If you owned your own business, you’d want to employ a manager whom you could depend on to handle and direct your business in a profitable manner. The point is, when it comes to money management, just think of your money as your own business. You want it to be successful and profitable, and good management is part of the equation. You'll need to educate yourself about budgeting and investing, and you may want to "hire" assistant managers -- financial professionals who can advise you.
Money management involves planning, analyzing and executing every aspect of your financial portfolio, including all types of investments, savings, taxes, banking and budgeting. As with managing any business, certain economic variables may affect your finances, and good money management involves assessing and controlling factors that may be detrimental to your fiscal fitness. Personal budgeting involves tracking and limiting your daily expenses in order to save money -- or, more basically, simply to know where your money is going, the vital first step in managing your finances.
Whether you’re planning to buy your first home soon or dreaming of a life without student loans, good money management is essential to achieving your financial goals and achieving a debt-free lifestyle. Imagine how you’ll feel when you cash in those certificates of deposit (CDs) you wisely invested in to pay off the last of your credit-card debt.
That magic eight ball might have been a reliable source of fortune-telling back in your adolescent years, but in the real world there’s no way to know what lies ahead. Economic conditions or personal circumstances, such as a serious illness or a job loss, can affect your financial situation without notice. If you have been managing your money effectively, you’ll have savings to cover most unexpected expenses and be able to weather almost any storm of unpredictability.
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