Financial Success And Management

Lesson 33 : Management Of Money

Financial Success And Management

Management for financial success (MFS)-consisting of orderly steps leading to specified goals. Such a system would utilize seven financial operations earning, saving, borrowing, lending, investing, insuring, and spending. Each of these monetary operations requires both internal and external decisions.

The following diagram provides a decision framework for the financial management process. In a simplified manner, it explains what can be done with money- the operations that make up the management for financial success system.

Steps in Successful Finance management:
Nickel, Rice and Tucker (1976) have given 10 steps in the management of income to aid families or individual in improving the quality of living.

  1. Define success in terms of overall goals for living:
  2. This is in terms of the life style, income or other economic and environmental resources and the peoples necessary to make life satisfying. If the family ignores its guiding philosophy of life, income planning become an end in itself, instead of a process based upon the family’s needs and short and long term goals.

  3. Identify objectives and sub goals:
  4. This includes reducing development, providing college education for children, owning a home etc. it is very important to analyze the individual and group needs of the family.

  5. Establish priorities and timings for the objectives:
  6. One should determine which objectives are most important and when they should be achieved during the family life cycle. The daily needs should be financed in light of long time needs (life LIC)

  7. Estimate the cost of objectives:
  8. While estimating the cost use realistic guides, consult news papers advertisements, use previous spending records. Visit different shops etc. This should also be related to the time of purchase or proposed date of acquiring the article or reaching particular goal/objectives.

  9. Analyze financial resources:
  10. This includes money, income, existing possibility potential credit, fringe benefits, net worth, quantity and inflow pattern of money and annual as well as lifetime expectations. Analyzing family recourses involves three aspects.

    1. Classifying current financial status through a net worth statement.
    2. Evaluating the current quantity, certainty, sources and pattern of income flow and predicting its continuation over the short term.
    3. Estimating the pattern of financial resources over the life time of the family.

  11. Formulate a plan of action:
  12. It is the current consumption plan for fixed and flexible expenditures, protection and growth.

  13. Organize all efforts:
  14. Establish goal oriented behavior, set up measurable sub goals, determine who pays the bills, makes the purchasing decisions, does shopping and keeps records and if there are credits when to pay these back.

  15. Control activities:
  16. Eliminate waste, motivate goal striving, spend for planned objectives, compare before buying, read before singing and pay yourself first.

  17. Keep adequate records:
  18. Keep record of how you make payment of installments, tax payment records, interest records, savings records etc. Establish a system suitable for the family needs and interests.

  19. Evaluate regularly:
  20. Evaluate the expenditure made at regular intervals. It also includes the insurance coverage, payment of premiums, credit payments, savings etc. Evaluate the decision making and assignment of financial management tasks.

    Each one should plan for using income and other economic resources to make to workable and satisfying. Any family that expects to accomplish its goals by having someone else direct the plan or by following some ready-made plan may have less motivation than a group who plans its own future.

Last modified: Thursday, 22 March 2012, 1:08 PM