Financial Management: A Guide to Managing Your Money
Money is a commodity that is accepted by general consent as a medium of economic exchange. It is the foundation of economics and finance. Finance is a term for matters regarding the management, creation, and study of money and investments. Specifically, it deals with how and why an individual, company, or government acquires the money needed and how they spend or invest that money. Financial management is the process of making money work to your advantage.
Why should you care about financial management? More than 82 million Nigerians live on less than $1 a day, according to Aljazeera News about N389 as at the time of the news. According to UNICEF research, 22,000 children die each day due to poverty.
Creating a Financial Plan
Financial management is part of our daily lives, from buying the food we eat to paying our tithes and planning vacations for our families. Financial management is a tool that can be used to make your dreams or those of your loved ones come true, or at least figure out how to.
To manage your finance effectively, you need to create a financial plan. This plan should contain a detailed list of all the money you receive, what you intend to spend it on, and how much you will have left after expenses. Before you make your budget, you should be aware of the things you spend money on, how much you spend on them, the cost of your needs and wants, and your different sources of income. With a clear knowledge of your wants, needs, income, and expenditure, you can create a plan that you know you can execute.
Staying Committed to Your Plan
Armed with a proper plan and knowledge, you should execute and stay committed to your plan. A finance manager ensures that the scarce financial resources are maximally utilized in the best possible manner at least cost to get maximum returns on investment.
Objectives of Financial Planning
Some of the objectives of financial planning include ensuring a reasonable balance between outflow and inflow of funds so that economic stability is maintained, effectively investing the suppliers of funds in companies which exercise financial planning, making growth and expansion programs to ensure the long-run survival of the company, reducing uncertainties with regards to changing market trends that can be faced easily through enough funds, reducing uncertainties which can be a hindrance to the growth of the company, and ensuring stability and profitability in concern.
Financial Goal: Profit vs Wealth
The most important goal of a financial manager is to increase economic welfare. Here, economic welfare may refer to the maximization of profit or maximization of wealth. Profit is the amount left after deduction of all expenses. Maximization of profit can be defined as maximizing the income of the firm and minimizing the expenditure. Profit is regarded as a parameter to measure firm’s productivity and efficiency.
Modern Financial Management Techniques
Whether you’re a business or an individual, you have to find a way to manage your finances now and in the future. The cost of everything continues to increase, and there’s no sign that this trend of price increases will stop anytime soon. As a result, all entities have to develop a financial management system to ensure their stability for many years to come. Some of the modern financial management techniques that can impact your life include investment planning, risk management, estate planning, and tax planning.
Conclusion
In conclusion, financial management is an essential aspect of our daily lives. It helps us to make informed decisions about our finances and ensure that our money is working for us. By creating a financial plan and staying committed to it, we can manage our finances effectively and achieve our financial goals. Financial management techniques such as investment planning, risk management, estate planning, and tax planning can also help us to secure our financial future.
