Slide 1 : 1 Be generous but not extravagant; be frugal but not miser
(Ali – R.A.) Personal Money Management Who adopts moderation never face insolvency
(Al-Hadith) (A Practical-Rational Approach on Effective Liquidity Use)
Advent of Money - Human Aspect : 2 Advent of Money - Human Aspect Individuals have multiple needs and desires.
The satisfaction of needs and desires of a person are linked with proactive attitude of self and reactive behaviour of others.
The autonomous satisfaction of needs and desires is not feasible.
The support system or sharing structure among persons works on every aspect of life and provides basis to money creation.
Advent of Money-Practical Aspect : 3 Advent of Money-Practical Aspect Economic aspect is outcome of countless interdependent economic agents.
Economic Agents adopted various exchange approaches to attain just economic dealings for needs satisfaction such as barter approach, silver coinage, gold coins, paper money, and plastic cards.
Presently, man use paper money and credit cards.
The new techniques were opted because the old systems were creating some practical problems due to exploitative human tendencies.
But, the evolved system is not ideal or exploitation free due to interest-based transactions or inappropriate exchange rates.
Significance of Money - Individual : 4 Significance of Money - Individual At individual level money is spent on some needs such as food, clothing, shelter, transportation, health, security, and education.
The genuine needs and necessary aspirations can be met amicably through sensible consumption patterns; enormous amount of money units is not essential. But, practically, individuals adopt irrational consumption patterns such as conspicuous consumption, impulse buying, and careless shopping.
Capitalist manipulates extreme consumption patterns and reaps benefits of irrationality.
Significance of Money - Institutional : 5 Significance of Money - Institutional Liquidity is needed to initiate, operate and develop the business institutions.
There are two major dimensions of liquidity management. One is the source of finance and the second is its effective utilization.
Lack of money creates frustration at multiple occasions of business transactions.
Again, an interest-oriented approach of some institutions, esp. the financial institutions, diverts the money towards wrong channels.
The solution of the problem is to convert interest-oriented approach into profit-driven approach.
A profit-driven effort is dominantly entrepreneur-driven or knowledge-driven economic struggle.
Continual Cash Flow : 6 Continual Cash Flow The continuous flow of money is achieved on account of certain beliefs and specific actions.
At mindset level, it is inevitable to replace negative beliefs with positive beliefs for promising financial opportunities.
At behaviour level, it is inevitable to replace rigid behaviour with flexible behaviour or volatile behaviour with firm behaviour to materialize financial opportunities.
Continual Cash Flow – Mindset Aspect : 7 Continual Cash Flow – Mindset Aspect The belief system develops mindset of an individual.
A mindset has power to attract or repel supportive environment.
A positive mindset attracts fruitful opportunities and repels harmful threats; consequently, a supportive working environ is available to a person.
On the other hand, a negative mindset repels fruitful opportunities and attracts harmful threats so that meager or volatile earning is materialized.
Continual Cash Flow – Behaviour Aspect : 8 Continual Cash Flow – Behaviour Aspect The second element that disturbs the continuous money-flow is wrong behaviour-pattern.
The prominent wrong actions or behaviour-patterns against cash flow are:–
Time Wasting,
Arrogance During Dealings,
Impulse Buying, &
Conspicuous Consumption.
Damaging Of Cash-Flow : 9 Damaging Of Cash-Flow The continuous flow of money is disturbed due to multiple reasons. These are:
Personal Weaknesses,
Social Injustice,
Economic Exploitation, &
Political Turmoil.
Cash-Flow & Personal Weakness : 10 Cash-Flow & Personal Weakness A weak or non-resilient approach towards avarice people is paramount reason of disturbed cash flow.
Cash-Flow & Social Injustice : 11 Cash-Flow & Social Injustice The lavish/miser spending is dominantly determined by multiple unjust social pressures.
A balance family life is best fence against unfair social pressures on consumption patterns.
Cash-Flow & Economic Exploitation : 12 Cash-Flow & Economic Exploitation A saving or spending approach of individuals towards money management is determined by propensities.
A propensity is inner inclination of an individual towards saving/spending.
Economies with irrational propensities face recursive liquidity crises due to economic miscreants; they exploit over-spending or over-saving patterns of individuals.
Rational propensities are inevitable for stable economies.
It is noteworthy that human propensities are shaped or refined by intellectuals, leaders, and opinion-makers.
Cash-Flow & Political Turmoil : 13 Cash-Flow & Political Turmoil A short-sighted political class or volatile political structure creates mess and confusion at all levels of life, obviously, consumption patterns or production patterns of peoples are disturbed.
A buying or spending behaviour becomes volatile due to persistent political uncertainty.
Volatile consumption/production patterns damage the money flow/value of money, consequentially, people face liquidity crunch.
Prominent Consumption Habits : 14 Prominent Consumption Habits People adopt or depict multiple attitudes towards money management.
We may categorize them into four styles – Miser, Moderate, Lavish, and Generous.
Moderate and generous life styles are positive or constructive while miser and lavish life styles are negative or destructive.
Moderation and generosity promotes stability and growth, while misery or lavishness promotes volatility and decline.
A moderate person spends according to available means and maintains cash reserve, generous person spends on others and maintains moral courage, miser spends only on inevitable needs, and lavish spends according to lust/brain impulse.
Priority Setting : 15 Priority Setting An effective money manger defines her spending demands as needs or important, facility or less important, aesthetics or least important, luxury or unimportant.
Prudential Financial Techniques : 16 Prudential Financial Techniques An effective money manager adopts some prudential financial techniques to attain maximum benefits from money units. These are:
Precise Income-Expenditure Assessment,
Priority Setting Of Life Goals,
Financial Planning,
Rational Execution Of Plan, &
Evaluation & Adjustments.
Some Practical Mistakes : 17 Some Practical Mistakes Some practical mistakes during saving/spending are:
No Cash Reserves.
Inappropriate Use of Credit.
Non-Constructive Use of Windfalls/Bonuses.
No Provisions for Large Yearly Expenses (e.g., Tax Payments).
Underestimating the Cost of Ownership (e.g., Car & House)
Spending Leakages (e.g., Impulse Buying).
Non-Economical Shopping. (e.g., Small Shopping)
Careless attitude on Small Savings
Casual behaviour on Small Spending.
Money Management and Entrepreneurship : 18 Money Management and Entrepreneurship A productive use of resources is essential for better institutional performance. Wrong usage of resources creates leakages; a leakage produces less than optimal results on entrepreneurial efforts.
Liquidity Crunch is expected phenomena of business life. Liquidity crunch creates conditions of urgency at institutional level, it demands courageous and non-egoist position by entrepreneur.
Income from profits, windfalls, and gifts is personal income of an entrepreneur. A volatile earning disturbs one’s life pattern. A volatile earning of entrepreneur is outcome of multiple reasons such as non-optimal spending pattern, wrong time management, miscommunication or wrong dealing, and low morale during socio-economic interactions.