Financial Management PDF

GED0006: PERSONAL AND PROFESSIONAL EFFECTIVENESS  FINANCIAL MANAGEMENT OBJECTIVES At the end of the discussion, the learner should be able to: Understand the importance of saving for rainy day or unforeseen expenses Realize the appropriateness of a personal budg...

GED0006: PERSONAL AND PROFESSIONAL EFFECTIVENESS  FINANCIAL MANAGEMENT OBJECTIVES At the end of the discussion, the learner should be able to: Understand the importance of saving for rainy day or unforeseen expenses Realize the appropriateness of a personal budget Develop a personal budget or financial portfolio IMPORTANCE OF SAVING FOR RAINY DAY OR UNFORESEEN EXPENSES  Financial Security Having savings provides a safety net, giving you the confidence to face unexpected challenges without compromising your financial security.  Avoiding Debt When faced with an emergency, people without savings often resort to borrowing money through credit cards or loans. This can lead to a debt cycle that becomes challenging to break free from.  Reducing Stress Financial stress can negatively impact your mental and physical well-being. Knowing you have savings to fall back on alleviates this stress and helps you focus on finding solutions.  Opportunity Fund Savings can also be used for seizing opportunities or investing in your personal growth, such as further education, starting a small business, or investing in assets. REALIZING THE APPROPRIATENESS OF A PERSONAL BUDGET  Control Over Finances A budget allows you to have better control over your money. You can track where your money is coming from and where it's going, which helps identify areas for improvement.  Setting Financial Goals With a budget, you can set specific financial goals, such as saving for a vacation, buying a house, or paying off debt. It helps you allocate your resources towards these objectives.  Avoiding Overspending Without a budget, it's easy to overspend and live beyond your means. A budget keeps your spending in check, preventing unnecessary debt.  Building Savings Budgeting ensures you allocate a portion of your income to savings regularly, making it easier to save for both short-term and long- term needs. DEVELOPING A PERSONAL BUDGET OR FINANCIAL PORTFOLIO  Categorize Expenses Classify your expenses into categories (e.g., housing, transportation, food, entertainment) to get a clear overview of your spending patterns.  Set Financial Goals Determine your short- term and long-term financial goals. These could be paying off debt, building an emergency fund, saving for retirement, etc.  Allocate Income Create a budget plan that allocates your income to cover all necessary expenses, savings contributions, and debt repayments. Make sure to prioritize your financial goals.  Review and Adjust Periodically review your budget to see if you're sticking to it and if any adjustments are needed. Be flexible and make changes as circumstances evolve.  References https://www.andyrogers.biz/2019/07/30/the-urgent-important-matrix/ https://www.investopedia.com/terms/p/portfolio.asp https://www.cnbc.com/guide/personal-finance-101-the-complete-guide-to-managing-your-money/ https://ojs.mruni.eu/ojs/societal-studies/article/view/4520/4195 https://digitalcommons.uri.edu/cgi/viewcontent.cgi?article=1035&context=hdf_facpubs https://www.annuity.org/financial-literacy/ https://sjes.springeropen.com/articles/10.1186/s41937-019-0027-5 https://www.consumerfinance.gov/consumer-tools/educator-tools/youth-financial-education/teach/activities/saving- rainy-day/ https://edubirdie.com/examples/the-importance-of-saving-money-on-a-rainy-day-an-essay/ https://n26.com/en-eu/blog/emergency-fund-and-rainy-day-fund https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7236434/ https://www.researchgate.net/publication/350404629_Saving_for_a_Rainy_Day_Making_it_Easier_for_Employees_t o_Build_Emergency_Savings