Financial management is a life skill. It is essential in every facet of life, from the individual, to the corporations and the nation as whole. It encompasses the entire process of generating revenue and judicious expenditure to create maximum returns. It involves using one’s money in an efficient manner such that needs will be satisfied.
Revenue is the money an entity receives for undertaking productive activities. It is the reward for performing a required or contracted assignment. It could be any amount of money received for the sale of goods and services. It may also be earned from an investment in the form of interests, dividends or royalties. Individuals receive revenue from wages and salaries. Countries earn their revenue from taxes paid to them by the citizens.
Expenses is an outflow of money to another person or an entity as payment for purchases or service. Expenses incurred by individuals include payment of rent and utilities, school fees, car maintenance and hospital charges. Companies incur expenses for their operating activities. They include salaries to workers, telephone and electricity charges, and vehicle and office machines. The nation incur expenses by way of compensations to civil and public workers. Another line of expenses is the construction of roads, hospitals and schools, grants and subsidies. Expenses are natural to life but the real deal is how it is managed with reference to the revenue envelop.
Our financial emancipation will emanate from how well we manage our financial activities vis a vis our revenues and expenditures. Individuals can manage their expenses better by buying what is needful and necessary as able to avoid impulse buying. Planning is key in this instance. Leave within your means! Do not spend more than you make!
Companies are equipped with planning and budgeting tools which guide them in their financial operations. A company is formed to create wealth. The strategy therefore is to increase revenue and minimize expenses. This calls for maximization in the application of resource to get maximum returns. The watch word is high productivity.
Nationally, the challenge is the same. Countries raise revenue from taxes to enable them undertake national programmes and agenda. This is captured in the national budget as reference document. The bane of most underperforming economies is the weak tax net and abuse of the resources therefrom. Government can do far better by spending the tax income judiciously. The wanton dissipation of the people’s money on luxurious and expensive v8 vehicle is an eyesore and mindboggling especially when the said vehicles are mainly used in the cities.
The high spending on the few government executives (business class air travels, fully furnished accommodation, medical services abroad) and the padding of contracts are worrisome to the financial literates. Governments can manage the kitty better by focusing on development and cost beneficial project and programmes as against wasteful frivolous expenditures as with the Accra desalination plant.
Sometimes, it is impossible to do away with certain expenses. In such cases, it become necessary to identify other sources of revenue to take care of such indispensable expenditures. The obvious last resort may be to borrow money from a financial institution. The caveat is to make sure such expenditures are investment in nature, capable of yielding adequate returns to set off the expenditure incurred. Individuals in such a dilemma should identify other work activities such weekend job, uber services or teaching children at weekend schools. Every time and everywhere you find a need, there would be an opportunity to earn some additional income.
Managing your finances is a critical life skill. Every entity has the responsibility to sustain lifestyle as humans and business operations as corporate beings. This would require the management of financial resources to enhance growth and development. As a nation, an effective and efficient management of our resources should improve our well-being and lifestyle. When we take charge of our finances and manage our expenses efficiently, there will be no need to request for assistance from the international bodies such as the World Bank Monetary Fund (IMF) for funding various projects. When resources are well managed it would create an opportunity to save and invest in wealth creation projects and programmes for nation building. As humans, our wants naturally exceeds our means. It is therefore very important to manage our expenses mindful of the fact that resources are always limited. When finances are well managed, there will be an efficient use of resources (money). – The Spectator