Financial management is the process of managing your money. It’s a broad term that encompasses everything from budgeting to investing and saving for retirement, but it all comes down to one thing: you need to be in control of your finances.
If you’re not sure what financial management means or how it affects your life, don’t worry–we’ll walk through some basic definitions here and then go over some solutions for those who are struggling with their finances.
Identifying a Lack of Financial Management
There are many signs of financial mismanagement. If you notice that your bank account has a negative balance, if bills are consistently being paid late or not at all, or if you have been using credit cards to buy things that are beyond your means, then it’s time for some serious self-reflection.
While these warning signs may seem obvious, sometimes people don’t realize when their finances are out of control until it’s too late.
Imagine though, if you now overlay this to a business. The business world of finance is different, and there are many key aspects and measurements that can help determine how successful your business is. These tools range from earnings calculators, like the one here, or apps that can help you keep your books.
The Risks of Not Being in Control of Your Financial Management
The risks of not being in control of your financial management include:
- Poor decision-making. If you don’t know how much money is coming in and going out, it’s easy to make poor decisions about spending and saving. You might spend more than necessary on groceries or entertainment, for example, because you don’t have a clear picture of where all of your income is going.
- Lack of financial security. When people don’t have an accurate picture of their finances, they may be unable to plan ahead for emergencies such as job loss or medical emergencies–and they may not be able to save enough money for retirement either!
- Financial trauma (or even bankruptcy). If there’s no way for someone who’s lost their job or fallen ill suddenly due to illness or injury but still has bills coming due every month–or worse yet if they’re facing foreclosure–that person could end up losing everything they own just because he/she wasn’t aware that something bad could happen until it did happen!
- Developing a Positive Financial Mindset
- You may not be in control of your financial management, but that doesn’t mean you can’t take steps to improve your situation. The first step is developing a positive financial mindset. This means learning how to recognize and overcome negative thoughts about money, which can lead to poor spending habits and other issues.
- If you find yourself struggling with debt or other financial problems, start by practicing gratitude for what you do have rather than focusing on what’s missing from your life–and then use this gratitude as motivation for setting goals that will help improve your situation over time. For example: “I’m grateful I have enough food in my pantry right now so no one goes hungry tonight.” Or “I’m thankful my car still starts up every morning even though it needs repairs soon.” These kinds of statements remind us that there are many things in life worth appreciating before we get wrapped up in worry about money matters (which often leads us down paths filled with regret).
Creating a Financial Plan
The first step in taking control of your finances is to create a financial plan. This can be done by creating a budget, tracking expenses and setting up an emergency fund. A budget is simply the amount of money you have coming in (income) versus how much goes out (expenses). If you don’t know where your money goes every month, this will help give clarity on where it’s going and what areas could use improvement. Tracking expenses involves writing down everything that comes out of your bank account each month so that when it comes time for tax season or any other time when deductions are made from paychecks or loans taken out, there won’t be any surprises!
One thing many people fail at doing when trying to get their finances under control is setting up an emergency fund: having enough cash available at all times so as not to put yourself into debt during emergencies such as car repairs or medical issues without having access even if banks aren’t open yet due
Making Smart Financial Decisions
When it comes to your financial situation, you want to make sure that you’re making smart decisions. The first step is researching the investment options available and considering their long-term effects on your life and goals. It’s also important not to make quick decisions based on emotions; if something doesn’t feel right or seems too good to be true, it probably is!
Seeking Professional Help
If you’re not in control of your finances, it’s time to get some help. You can start by talking with a financial advisor or financial planning services about what you want out of life and how best to achieve those goals. There are also debt relief options available if you need them.
The first step to taking control of your finances is educating yourself.
Reading personal finance books and blogs, attending financial seminars and workshops, or even enrolling in a course on the subject can help you learn more about how money works. Having this knowledge will give you a better understanding of what’s going on with your money so that when something goes wrong (and it will), at least there is some context for why things went wrong and what steps could be taken next time around.
We have designed an online course that can help you to understand more about what is running a business from a financial perspective.
You may also want to consider hiring an accountant who specializes in small businesses or someone who has experience working with clients like yours–this person could help keep track of tax filings as well as offer advice on how much money should be saved each month based on projected expenses over time
Break down your goals into smaller steps.
Create a timeline for each of these steps, and make sure that it’s realistic and achievable.
Use the “if-then” method to create contingencies for when things go wrong or you need help with something else in your life that might interfere with achieving your goal (for example, if I have no money left at the end of the month, then I’ll have to cancel my gym membership).
Overcoming a Lack of Financial Management
Focus on progress, not perfection.
Reward yourself for small victories along the way by using your hard-earned money to buy something you really want or need.
Overcoming Financial Phobia
Sometimes though, it could be that you and financial matters have a problem. You have a fear of understanding money.
There are many causes of financial phobia but all are driven by our avoidance of doing ourselves harm.
Life has an uncomfortable habit of dishing our unexpected challenges. This could be a loss of a job, divorce, or another life event that results in a sudden change in income. This form of financial trauma is something that we don’t forget and actively protect ourselves against in the future.
As we grow up, we often look at others around us as role models. If you grew up with parents who were afraid to spend money on anything other than necessities like food and shelter, then chances are you’ll follow suit and become financially conservative yourself.
Another reason people develop financial phobia is that they lack financial education–they don’t know how to make smart decisions when it comes to spending their money wisely (or even worse: they don’t realize there’s such thing as “smart” spending).
So how can we get around this financial phobia?
- Staying positive. It’s important to remember that you are not your money, and that you can’t control how much of it comes into your life. You do have control over how much goes out, however, so focus on making smart financial decisions and getting the most out of what you have.
- Focusing on progress rather than perfectionism or failure. There is no such thing as perfect money management; even if you follow all the rules perfectly, there will be times when things go wrong–and that’s okay! It’s important to remember that every step forward counts toward reaching your goal of improving your finances and increasing confidence in managing them well (which will lead to more success).
- Rewarding yourself for progress made towards overcoming financial phobia by doing something fun with friends or family members who support your efforts at self-improvement–or simply reward yourself with some chocolate cake!