The Importance Of Financial Management

Anyone can become rich like Bill Gates if only one has the knowledge of financial education. As mentioned in the quote by Mr. Bill Gates “…I’m the son of a farmer” indicates that Mr. Gates was not born rich, yet one of the billionaires today and this is only achieved through the knowledge of financial management. Financial management is simply the area of financial decision making, harmonsing individuals’ motives and enterprise goals (Introduction to Financial Management:Definition of Finance, 2017). In financial management, there is efficient and effective management of money. Thus this essay shall discuss, using the message portrayed, the concept of financial management, its importance and as to how it can elevate one’s standard of living

According to Blog Spot, financial management helps to set achievable goals (Blog Spot, 2012). For instance, everyone has at least two to three goals in there lives such as buying a hybrid car or buying a house and this can only be achieved through having proper financial management. Also people need to plan for their future so that they can meet up with their unexpected events. Even though, not everyone is rich like Bill Gates but financial planning for future is the key to being able to retire and live comfortably later in life. To illustrate, people must manage its finance in such a way, that they can keep their expenses to the minimum level and have savings for retirement so that they do not have to rely on anyone for their expenses in future. A person should manage its finance so that they do not overspend and to remain prepared for all the expenditure at present and as well as in future. The quotation portrays that Bill is managing his finance will as he is giving just two dollars to the waiter as a tip. This indicates that even though how rich a person gets it should not forget its financial management principles. On the other hand, Gate’s son is doing the opposite; he is giving one hundred dollars as tip to the waiter. His son seems to misuse money as he not worried about his future.

Having proper knowledge of financial management will help a person to make its decisions wisely, thus each and every person will be able to save money and achieve their goals. For example, if a person has knowledge on financial education then that person can make a plan to achieve its goals, control and monitor its daily expenses and then finally can organize its money to achieve the desired result such as buying a car or house. This can lead to the improvement in the standard of living of a particular person. Along with that, when people get income it is either saved or consumed .As people make wise decisions and save money in their bank accounts, the money which is placed are mostly given out as loans to the firms for investment and when investment increases output also needs to increase, thus a lot of people are required to produce the output resulting in increase in employment. People who were unemployed before are now earning a source of living which will increase their standard of living. Also if government takes loans from the banks to invest in public goods such as roads, then people’s standard of living will also increase as before people used to have dusty gravel roads but after the investment, this is replaced by tassel