Budgeting

Budgeting

Money management is significant in assessing the possible impacts of engaging in risk-taking, especially where there are uncertainties. An individual draws a plan indicating the amount of money that he/she can risk to satisfy the needs and also remain on the safer side (Belk et al 2003). For the people trading in stocks and gambling amongst other businesses with high risk, money management is usually a significant tool to form the basis of decision making. It helps a person to be in control of his/her income and expenditures, whereby the expenditures are maintained at minimum levels compared to the income. Budgeting is one of the major tools for money management. It is important in giving guidelines for purchasing decisions.

One of the aspects of poor money management is usually exhibited in problems with personal debts. It happens that households have access to debts on their credit cards which they are free to use at any time when the need arises. This can be a very helpful possession especially in case of eventualities that require money since an individual can settle family needs without much struggling to acquire finances. However, it becomes a problem when not effectively used. It has been established through studies that many Americans use credit cards without consideration of the fact that they accumulate debts which will have to be repaid at the end of the month (Evans et al 2006).

Simple loans and overdrafts to satisfy personal needs are also a major contributor to the amount of debt that needs to be settled at the end of the month. When this time comes, the salary received is used to reinstate the debts owing, which leaves a person with little money to finance the needs of the subsequent month. This leads to further borrowing, making an individual to be in debt all the time. It becomes a trend where the earnings of a particular month are spent within that month, leaving nothing to save for the future (Belk et al 2003).

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