Successful money management is the foundation of any financial planning. Without it, no matter how great our investing or retirement plans, they’ll likely fail. Money management has three primary objectives:
Current Needs
1. Ensure sufficient funds are available to meet current payment and spending requirements.
Emergency Fund
2. Ensure an adequate reserve of funds exists to be used as an “emergency fund” for unexpected costs, loss of job or other necessities.
Long Term Goals
3. Ensure enough income is set aside for both long and short-term future goals, i.e. savings, retirement, education, additional debt payments, additional investments, new house/car fund, etc.
Your tools in this endeavor are continual analysis of net worth and cash flow (making adjustments when necessary), budgeting, saving strategies and constructing future goals with successive steps towards achieving them. Successful money management, like all financial planning, is a process not a product. Once your plan is established, reviews and adjustments should be made as necessary.
