Making financial decisions should be taught to school children at a young age, but across the world, it isn’t done so. The topic of money isn’t discussed by parents to their children as they think “Money is the root cause of all evil”. Due to this, young adults entering the corporate world have no idea how to manage their money. They often fall pray for large banks and credit card companies who trick them into paying more than what they should be rightfully paying. These companies profit from the lack of financial knowledge that their customers have. Therefore, it is a must to learn how the financial world works and how we can avoid any debt because of bad decision making with our income.
Also known as investment management and portfolio management, money management broadly refers to the processes utilized to record and administer an individual, household, or organization’s finances. In the market, consumers have access to a wide range of resources and applications that allow them to individually manage nearly every aspect of their personal finances. As investors increase their net worth, they also often seek the services of financial advisors for professional money management. Financial advisors are typically associated with private banking and brokerage services, offering support for holistic money management plans that can involve estate planning, retirement, etc.
Money management is used in investing and deals how much risk a decision maker should take in situations where uncertainty is present. More precisely what percentage or what part of their wealth should be put into risk in order to maximize the decision maker’s utility function. Money management can mean gaining greater control over incoming salary and outgoing investments, both in a personal and business perspective. Greater money management can be achieved by establishing budgets and analyzing costs and income etc.
Financial experts curated a list of five simple money management tips that can help an individual feel more financially secure:
- Create a comprehensive budget – Write down how much money you receive from salary, bonuses, benefits reimbursements and other sources. Compare that to all of your expenses to ensure you have enough money to cover all that you need,
- Spend less by shortening day-to-day costs – Identify areas to save, for instance, planning meals and groceries to avoid takeout lunches and last-minute ordering in.
- Eliminate unnecessary costs – Make a list of your current bills and their due dates, and pay your bills on time to avoid late fees and penalty charges.
- Find ways to pay less interest on your debts – Focus on paying off debts with the highest interest rate first.
- Set clear goals to help accelerate your savings – Write down all the things you’re saving for, then work out how much you need to set aside each month to reach your goals.
Working with an advisor who has great knowledge in the field of money management helps setting goals, develop customized financial plans, prepare strategically to be finically secure during economic recessions, hence reducing financial stress.