Money Management Strategy

1. Successful Money Management

A. Money management: The day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security.

B. Opportunity Cost and Money Management

1. 1. 1. Spending money on current living expenses reduces the amount you can use for saving and investing for long-term financial security.
      2. Saving and investing for the future reduce the amount you can spend now.
      3. Buying on credit results in payments later and reduces the amount of future income available for spending.
      4. Using savings for purchases results in lost interest earnings and an inability to use savings for other purposes.
      5. Comparison shopping can save you money and improve the quality of your purchases but uses up something of value you cannot replace: your time.

C. Components of Money Management

1. 1. 1. Personal Financial Records and Documents
      2. Personal Financial Statements
      3. A Budget or Spending Plan

   2. A System for Personal Financial Records

            3. Personal Financial Statements

A. The Personal Balance Sheet: Where are You Now?

Items of Value – Amounts Owed = Net Worth

B. Evaluating Your Financial Positiion

If you are a traditional college student, don’t be surprised if your net worth is negative.

C. The Cash Flow Statement: Where Did Your Money Go?

Total Cash Received during the time period – Cash Outflow during the time period = Cash Surplus or Deficit