In the previous chapters we have addressed what I consider the most important compomponent of money management, your personality. The confident person who has a strong desire to succeed and understands the values and importance of money in his present and future life is the person who is much more likely to understand, protect, and manage his money. Understand your potential, recognize the need to do more, find a desire to invest, set a goal and get it done. When we lack motivation, confidence, or any goals, we are much less likely to keep track of our money, and much more likely to spend it. Basic procedural money management, like budgeting, have little influence on the person who doe 'not care or does not have a reason to care.

With the above as a preface, we will now discuss money management. An ways to improve your current practices. Let us first ask what is money management? Money management can mean different things depending on the situation. For the gambler, it may mean regulating how much you risk on each bet to avoid losing everything. For the business it may mean controlling and accounting cash flow to ensure profitability. To the individuality it may mean making your salary go further. To me it means being in control of your money. In a company, the role of a manager is to control and direct resources toward the goals of the company.

In your household, your resources are your time, family, and money. Money management is a term specifically related to the latter, your money. How you should use that money depends on your goals. These goals should probably include survival, a happy family, and long term stability. Your goal as the manager of your finances is to ensure that all of your goals are being met, just like the goal as a parent (family manager) is to ensure that all of your family goals are being met. There is a clear connection here and both roles (Finance manager and Family manager) must work together. Typically money management defaults to finding ways to reduce the amount you spend on immediate pleasure, or trying to fine more money to spend on something you want. The likely problem is a lack of defined goals and a plan, we don't know what we want so we keep spending until we find it (see chapter 3 - psychology of money).

Future chapters will discuss formulating goals and implementing plans. For now, money management can mean many things. When we view it in the context of a business manager, it means understanding the dynamics of our money, (i.e. where it comes from, our interaction with it, and where it goes), organizing this resource, and putting it to work toward accomplishing the goals of the family.

The next chapter: Chapter 8 - Cash Flow, we discuss practically what the role of a money manager is and how to properly control the flow of money in our our own lives. Click Here to continue.