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MONEY MANAGEMENT VS FINANCIAL PLANNING

Money management and financial planning may sound like a ‘tomato-

tomahto, potato-potahto’ situation to most people. They are different words

that many use interchangeably. However, these are two complete

opposites. Together, they help to build the foundation of a successful

financial future.

Before we get into details, let’s talk about what money management and

financial planning are.

What is Money Management?

Money management includes many aspects such as spending, budgeting,

and saving money. It is focused on the functions that are crucial on a day-

to-day basis. In other words, it's a way of tracking your daily purchases and

keeping an eye on the money you spend on everyday expenses. The good

financial sense is important, but it isn't enough. Without proper study and

effort to understand the basics of money management, handling your

everyday expenses can get quite challenging.

What is Financial Planning?

On the other hand, financial planning is about aligning your current

spending and saving with your future objectives. It is a step-by-step

process to meet your financial goals through investing and saving. And, if

properly executed, it sets a clear path to financial success for you.

The Importance and Impact of Money Management

To most people, money management can be summarized into a single

statement we have all heard one too many times -- “save 30% of your

paycheck for the taxes.” But is that it? Well, not exactly.

Money management is the steppingstone of long-term financial planning.

Keeping track of what we own now can make large scale investment

decisions seem a lot more realistic. At the end of the day, money

management comes down to making the right decision at the right time.

Let’s take a look at credit scores as an example. Timely paying your credit

bills not only saves that late fee you would have to pay, but it also

increases your credit score. A high credit score has many benefits such as

a lower interest rate on mortgages and loans. As you can see, just paying

your credit card bill on time can save you thousands of dollars that would

have gone into mortgage interests. When it comes to money management,

time is money and money is the time!

Financial Planning: The Key to A Successful Financial Portfolio

Think of financial planning as a game of basketball. Before the game, you

start with objectives and a plan to achieve them, while considering the

possible contingencies that might affect the outcome. Financial planning is

the same but with a whole lot of money!

Financial planning helps you have a little peek into your future - where do

you see yourself 10 years from now? what safety nets do you have if you

are no longer employed? do you have a retirement plan? A financial plan

prepares you for all these questions and many more concerning your

future!