Posted on December 1st, 2022.

Financial Management is an essential aspect of our daily life. We are caught up in our daily life so much that we forget to realise the importance of financial management.

Without the knowledge of financial management it is not possible to live a life of bondage and know how to adequately pay your bills and get out of your financial debts. Having necessary financial management skills will make sure that your money is managed well. 

Here we discuss financial management at an individual level. It includes how you manage your money through Savings, investments and manage your expenditure. Broadly speaking other aspects of financial management are banking, budgeting, insurance, retirement planning and others. 

Importance of financial management in life

Financial Management is about meeting long term and short term financial goals. There are numerous reasons why Financial Management is important but here we focus on a few of them.

1. Ensures that financial needs are fulfilled
2. Helps in managing your income
3. Budgeting, Savings and expenses
4. Personal Finance
5. Ensures financial security

1. Ensures that financial needs are fulfilled

Money matters are most important for any individual. Earning money is one aspect and ensuring that money fulfills your needs is another aspect.

Having a plan that establishes how much is an individual income, what are the expenses, making plans about spending the income, planning for future goals are important aspects that ensure financial needs are fulfilled.

Financial management ensures the financial needs of an individual are fulfilled if the following are managed effectively.

• Creating a monthly budget and following it
• Payment of bills on time
• loan management
• Savings for retirement
• Managing credit cards and tracking credit score

When you have good knowledge of personal finance and money management skills, you have the advantage of facing financial challenges, use opportunities and work on responsibilities that come your way.

2. Helps in managing your income

If you do not have a plan for your income you will end up spending more than you earn or spend on items that you do not need. With a good financial management plan, you can manage your income effectively.

If you have a good financial plan then you will spend on what is necessary, save money for your future and make proper investments.

Financial management helps in knowing which expense to handle first and which one later. You will effectively make tax payments, do savings and pay monthly bills.

3. Budgeting, Savings and Expenses

If you spend your income without a plan on unnecessary expenses or if you spend your income according to your whims and fancies you will fall into a huge debt. This may happen because you spend more than required and you will become financially unstable.

Financial management helps you in Budgeting your income. Budgeting helps in planning your income where your money should be spent, how much income should be saved, how much should be invested.

According to your lifestyle plan, stick to what you have budgeted, avoid overspending and direct your money towards savings. Savings and Investments money will rescue you in tough times.

4. Personal Finance

Personal finance helps you to increase your cash flow. Financial management helps you in tracking your expenses and spending patterns. It helps you to easily increase your cash flows.

Cash flow can be increased through the following.

• Tax planning
• Spending wisely
• Proper Budgeting

When you follow all these it will ensure that your money is not spent unnecessarily. Having a personal financial plan is very important because it ensures the right financial track.

5. Ensures Financial Security

Financial management ensures financial security for you and your family. Proper management of finance gives financial freedom. By having the Financial freedom it gives financial security.

Having a right investment plan, right insurance plan, proper savings, will ensure that it gives you and your family financial security.

Source: www.mymoneysouq.com