Business and Personal Finance © 2007

Chapter 3: Money Management Strategy

Chapter Summaries

• There are opportunity costs, or trade-offs, in all decisions. When you make a decision about how to manage your money, you remove the option to use the money in a different way.
• Organizing your financial documents makes it easier to plan and measure progress, handle routine money matters, know how much money is available, and make effective decisions.
• You can organize financial documents in home files, a safe-deposit box, and on a computer.
• A personal balance sheet helps determine your net worth, so you can manage your money to meet your financial goals. A personal cash flow statement helps determine the amount of cash you receive and how you spend it.
• On a personal balance sheet, list the value of all your assets, along with all your liabilities. On a personal cash flow statement, record your income and expenses. Then subtract your expenses from your income to determine your net cash flow.
• To create a budget: (1) Set financial goals; (2) estimate your income; (3) budget for unexpected expenses and savings; (4) budget for fixed expenses; (5) budget for variable expenses; (6) record what you spend; and (7) review your spending and saving patterns.
• Savings are the key to a sound financial future. Savings enable you to handle unexpected emergencies.