Sunday, 22 May 2011

Managing Your Finances

     "When you start really respecting yourself, those you love, and your money, the result is that you start having control over your money. What follows from that is control over your life." Suze Orman
     Finances are similar to time. Whether you are aware of it or unconscious about it, money goes. It goes somewhere, and the two ultimate questions are: Do you know where your money goes? Are you in control of how your money is spent? There are no "right" answers to these two questions. There are only choices and consequences.

     Maggie, the daughter of a friend of mine, had her first summer job as a lifeguard at a local summer camp. Over three months, she earned $1,600, yet at the end of the summer, she had nothing to show for her hard work. When her mother asked her where the money went, her answer was "I don't know." Upon thinking about the question, she enumerated, "I spent the money on coffee, drinks, food, movies, CDs. makeup, shoes, and some presents for friends." Her mother asked if it ever occurred to her to save some for the future, she replied, "No."
     After this conversation, it became clear to my friend that some discussion on money management was in order. Not that it was necessarily wrong for Maggie to spend her money on entertainment or fashion, but she might be establishing an unconscious life pattern of earning and spending that was not the most prudent in the long run. First n the foremost was the awareness of where the money was going.
     Maggie and her mother had a discussion about money as a resource. Her mother said that money was like energy, here are gone. If you didn't know how to conserve it, you could wake up one day and find out that you didn't have any left. She also said that money could be divided into three piles: a now pile, a later pile, and much, much later pile. The now pile was immediate, simple pleasures: coffee, movies, gas, and CDs. Later was for sometime in the future, three months to one year,, for larger purchases: rent, food, clothing, car expenses, trips, and the like. And the much, much later fund should go into savings for school and should be touched only in case of emergency. Maggie was quite interested to learn this concept. Previously she had considered money s a form of instant gratification. If you have it, you spend it. She had never really done any long-term planning; conserving and saving were new concepts.
     Some people are adult versions of Maggie. They are used to spending every cent they earn. If they earn more, they spend more, and so on. It is important to look at the big picture and choose what you want to achieve with your finances, both in the short term and in the long term. If you never learned it form your family, your teachers, or your role models, learning to save is a skill that must be developed. Saving and investing in the right vehicles also helps accomplish objectives that you might wish to fund in the future.
     Managing your finances creates peace of mind. Life costs money, and knowing how much you have and consciously choosing where and how to spend it puts you in the driver's seat. It allows you to live gracefully as opposed to clutched with fear, anxiety, or panic about insufficiency and survival. When you are ease, your life-and hence your ability to succeed further - just flows better.
     Successful people, by and large, have come to terms with their resources and have made conscious choices each area. So too must you assign values to your time, people, energy, and finances. The more aware you are, the more effective are your choices.
     Resources are limited; they are to be used as your discretion. If you are mindful of those variables that are within your control, you can make wise choices about the allocation and use of those resources. How well you manage them will determine how far your efforts take you.
     Ultimately, either you manage your resources or they manage you. Which shall it be?

1 comment:

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