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Understanding Money Management
Red Stories
Oct 5th 2021

Understanding Money Management

Nicholas Y.
Nicholas Y.

When we talk about management, what often comes to mind is People, their skills, resources, projects, and the list goes on. On that list, it takes us a while to get to Money. But I am sure it is not because you think money is not relevant.


One of the synonyms of Money is Currency, and that means it flows. It comes to us, and it will definitely leave. You can save money, but you cannot save its value. This is why it is necessary to let money flow at its current value in and out of your hands. This is the core of money management.

 

What is money management?

Money management is the process of planning and monitoring an individual or group’s use of capital. It involves planning, tracking, saving, investing, budgeting - basically everything you do with money. Money management is something we do every time we make a financial decision. Management insists on the outcome of every decision aligning to set goals while yielding the highest interest output possible for the money spent.

 

Money management is a broad concept but can also be narrowly viewed as investment management. In Personal finance, money management chiefly involves saving, budgeting, spending and investing. A person wants and needs are the primary determinant. Periodic financial planning is a helpful strategy to keep on track, and it helps prioritize needs objectively.

 

In Corporate finance, money management starts from the raising of capital to its spending. It also involves planning and budgeting as a guide to spending as in Personal finance. However, money management in Corporate finance is more comprehensive and requires expert financial analysis.

 

Money management in the financial market involves Asset managers investing and managing the capital of their institutional and individual clients in different assets to generate returns. The assets include real estate, stocks, bonds, and equities - basically, anything that has the potential of yielding considerable returns over time and is within legally prescribed bounds. Ethical bounds for investments are in most cases subject to religious and cultural prescriptions.

 

Asset managers are charged with the responsibility of analysing profitability, identifying risk, managing risk, and making decisions accordingly. They also offer advice on investments, retirement services and financial planning. This is otherwise known as Investment Management and Portfolio Management.

 

The top 5 money management firms are The Vanguard Group, BlackRock Inc., Investco Ltd., Pacific Investment Management Company LLC, and Fidelity Investment. These companies have been around for 30 - 45 years and counting. They have a track record of excellence and all boast of Assets under management (AUM) worth trillions of dollars.

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