MONEY MANAGEMENT STRATEGY

Module 2
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TOPICS

 Money Management
 Major Money Management Activities
 Organizing personal financial documents
Creating personal financial statements
Creating and implementing a budget

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LEARNING OUTCOMES

 Describe the different ways of

organizing personal financial
documents

 Create personal financial statements

and budget

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Money Management refers to the strategies and techniques to
determine the use of an individual, company, or institution’s
capital. In personal finance, money management covers
budgeting, spending, and saving (investing).

Also, money management can be proactive with periodic or

regular financial planning.

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Planning for Successful Money Management
 Daily spending and saving decision are the heart
of financial planning
 Decision must be coordinated with needs, goals
and personal situations
 Money Management is the day to day financial
activities needed to manage personal economic
resources, while working toward financial
security.

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Money Management and Achieving Financial
Goals
 Balance sheet reports current financial sheet
position
 Cash Flow Statement shows cash you have
received and spent in the past
 Budget helps you to spend and save to
achieve financial goals

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“ Financial
documents
records
that
are
provide
evidence of or summarize
business transactions.
At the most detailed
level, financial records can
include invoices and receipts.

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Benefits of an Organized System Financial Records
 Handling daily business affairs including payment of bills on
time
 Planning and measuring financial progress
 Completing required tax reports
 Making effective investment decisions
 Determining available resources for current and future buying

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How to Organize your Financial Records

1. Gather all your financial documents. This should include

paperwork, bills, and unopened mail.
2. Set up a filing system. Review the documents you have

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FINANCIAL FOLDER WHAT TO INCLUDE
Advisors List of names, addresses, phone
numbers, and e-mail addresses
of the important people in your
financial life.
Auto
Car or truck title, O.R/ C.R/
Insurance and maintenance
record.

Bank Accounts Keep your monthly statement

until it is reconciled and the next
monthly statement has come in
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FINANCIAL FOLDER WHAT TO INCLUDE
Bills Due Immediately after opening mail, file
bills you have to pay.
Contracts Legal agreements (like divorce papers,
loan, lease of contract) employment
contracts, and others

Credit Cards An annual credit report, your current

monthly statement, older statements
that contain expensive items that are
under warranty through your credit
card company. 13
FINANCIAL FOLDER WHAT TO INCLUDE
Education Enrollment records, diplomas,
certificates, grade cards ,transcripts,
and progress reports.
Employment Employee handbook and benefits
handbook, paycheck stubs (the
most recent if cumulative data
appears on the stub), employee
evaluations, current resumé.
Healthcare Medical records, copies of insurance
cards, receipts, any other insurance
information 14
FINANCIAL FOLDER WHAT TO INCLUDE
House Repair and Maintenance Records and receipts for any
home services, repairs, or
equipment (such as lawn
mowers).

Insurance Any insurance policies you

have: home, life, auto, medical,
personal property, and others

Investments Bank investment account

statements, brokerage account
records, mutual fund
statements, retirement plans,
and other investments
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FINANCIAL FOLDER WHAT TO INCLUDE
Loans All documents pertaining to a loan
for as long as you owe money on
the loan
Readings Important financial materials that
you’ll read at a more convenient
time. File it in the proper place after
reading
Tax Records W-2s, 1099s, charitable contribution
receipts, and other items pertaining
to the current tax year. Keep tax
returns and supporting documents
for at least three years 16
FINANCIAL FOLDER WHAT TO INCLUDE
To Do Pending finance-related projects

Utilities Current monthly statements for water,

gas, electric, phone ,internet and cable
or satellite TV.

Warranties Keep warranty information on file until

an item is no longer under warranty.
Wills, Trusts, and Estate All current, executed estate-planning
Planning documents, as well as list of beneficiary
designations
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3. Separate your paperwork into four
stacks: Bills to be paid, to do/read,
file, and shred.

4. Place the bills to be paid stack into

your new bills due file, place the
papers in your to do/read stack
into your new to do or read files,
file all items in your file stack in
their appropriate files, and shred
the remaining papers.

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The term personal financial statement refers to
a document or spreadsheet that outlines an
individual's financial position at a given point in
time.
The statement typically includes general
information about the individual, such as name
and address, along with a breakdown
of total assets and liabilities.

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The main purposes of the financial statements
are to :
(1) report your current financial position;
(2) measure your progress toward financial
goals;
(3) maintain information about your financial
activities; and
(4) provide date your preparing tax forms or
applying for credit.

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How to Prepare a Personal Financial Statement
To create a personal financial statement, follow these
simple steps:
 Create a spreadsheet that has a section for assets and
one for liabilities- You can choose to list liabilities and
then assets or assets and then liabilities. You’ll need
another section or cell of a spreadsheet that will show your
calculated net worth.

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 List your assets and their worth- Common assets include
owned real estate, checking and savings account balances,
the value of stocks or annuities, the balance of retirement
accounts, and valuable assets such as fine art or rare coins.
List each asset in its cell. In the cell next to the asset, place
the amount value of the item.

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 List every liability as well as its worth- A
liability is something on which you owe money
or on which you are a cosigner.

Examples of liabilities include balances on

personal loans, credit card balances, small
claims or other court judgments against you,
and unpaid state or federal taxes. Name
each liability and then in the cell next to it,
including the balance.

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 Determine the total of both assets and
liabilities- If you’re using Excel, you can
highlight the row that lists the dollar amount of
each asset and use the total formula. The
same can be done for the liabilities. The total
of each should be listed directly underneath
their corresponding category.

 For example, Php411,000.00 in total assets

and Php125,000.00 in total liabilities.

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 Determine your net worth- To calculate your
net worth first create a net worth total cell.
Then, in the cell next to it, subtract the total
amount of your liabilities from your total
amount of assets.

 Using the previous example, the net worth

would be Php286,000.00.

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Budget is a spending plan to show how
much money
a person or organization will earn and how
much they will need or be able to spend
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The main purposes of budget are to help you
live within your income, spend your money
wisely, reach your financial goals, prepare for
financial emergencies, and develop wise
financial management habits

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Selecting a Budget System
1. Mental budget- it is all in your head
2. Physical budget- use envelopes as expenses
such as food, rent, bills and others
3. Written budget- use spreadsheets
4. Computerized budget- use software

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 Characteristics of Successful Budgeting
 Well planned
 Realistic
 Flexible
 Clearly Communicated

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A Plan for Effective Budgeting
Step 1: Set financial Goals
Your future plans are the foundation for a financial direction.
Financial goals should take a SMART approach with goals are
specific, measurable, action oriented, realistic, and time based

Step 2: Estimate Income

After setting goals, you need to estimate available money for
given period. A common budgeting period is a month, since
many payments, such as rent or mortgage, utilities and credit
cards are due each month.
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Step 3: Budget an Emergency Fund and Savings
To set aside money from unexpected expenses as well as
future financial security, financial advisor suggest that an
emergency fund representing three to six month of living
expenses be established for use in periods of unexpected
financial difficulty

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Step 4: Budget Fixed Expenses

When planning a budget for your small business,

you have expenses that you can anticipate and
some you cannot. Fixed expenses are regular
and expected.

You can plan on including those expenses in

your budget every week or every month for a
certain period

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Step 5: Budget Variable Expenses
Planning for variable expenses is not easy as
budgeting for savings or fixed expenses.
Variable expenses will fluctuate by household
situation, time of year, health, economic
conditions and variety of other factors

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Step 6: Record Spending Amounts
After having established a spending plan, you will need to
keep a track of your actual income and expenses.
This process is similar preparing a cash flow statement.

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Illustration No. 1 Cash Flow Statement

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