Money management is the way daily financial events are handled in step with financial goals. The reason money management is important is because if it is done properly, there are potential benefits or at least less monetary problems that may crop up. Money management is an essential ingredient to growing wealth, controlling costs, keeping cash flow under control and maintaining proper credit, debt to income ratios and so forth. A few key areas of money management are savings plans and budgets, personal money management, money management programs and money management software.
Creating a Savings Plan and Budget:
Savings plans are for money that shouldn't be used for anything other than saving. It is essentially a financial faux pas if not bad financial form to use money allocated for savings for anything other than transfer to a potentially better savings product. Savings plans could be a corporate pension, an Individual Retirement Account, a brokerage account, money market account, life insurance policy etc. In other words, there are many places to save. Choosing the right savings instrument depends on personal factors such as time-line, risk tolerance, rate of return, tax benefits and accessibility. Savings plans may also include weekly, monthly, biannual or annual contributions depending on the individual savings plan.
Budgets compliment savings plans in the sense that a good budget keeps costs under control and when adhered to, can allow one enough extra money each month to be able to save. This is often easier said than done as people often experience unexpected bills such as car repairs, medical co-pays, or higher than anticipated travel expenses. For this reason budgets should also include emergencies and unanticipated expenses. For example, 7% of one's monthly income is a reasonable amount to contribute to an emergency expense fund every month. What isn't used can be carried over to the next month.
SOURCE:
http://www.helium.com/items/819986-money-management-tips
Creating a Savings Plan and Budget:
Savings plans are for money that shouldn't be used for anything other than saving. It is essentially a financial faux pas if not bad financial form to use money allocated for savings for anything other than transfer to a potentially better savings product. Savings plans could be a corporate pension, an Individual Retirement Account, a brokerage account, money market account, life insurance policy etc. In other words, there are many places to save. Choosing the right savings instrument depends on personal factors such as time-line, risk tolerance, rate of return, tax benefits and accessibility. Savings plans may also include weekly, monthly, biannual or annual contributions depending on the individual savings plan.
Budgets compliment savings plans in the sense that a good budget keeps costs under control and when adhered to, can allow one enough extra money each month to be able to save. This is often easier said than done as people often experience unexpected bills such as car repairs, medical co-pays, or higher than anticipated travel expenses. For this reason budgets should also include emergencies and unanticipated expenses. For example, 7% of one's monthly income is a reasonable amount to contribute to an emergency expense fund every month. What isn't used can be carried over to the next month.
SOURCE:
http://www.helium.com/items/819986-money-management-tips
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