Your Personal Finance Management

Finance is about money management. In an organization, It involves managing cash flows of revenue and expenses, of financing activities such as borrowing money and repaying it, and of investing activities such as buying property and revenue generating assets, buying quoted securities and placing fixed deposits in banks. The objectives are to have sufficient cash resources to meet debt obligations and to take advantage of investing opportunities to increase net asset value and thus net worth. These cash inflows are generated from profitable activities in which revenue is expected to exceed expenses. Technically, the objectives in money management are centered on profitability, liquidity and solvency.

All these monetary transactions are measured and recorded in a “double-entry” accounting system that is computerized. The accounting transactions of “debit and credit” entries are then summarized to produce 3 key financial statements for reporting to management and to shareholders:

1. Income Statement for the financial year (involving revenue, expenses and profit)

2. Balance Sheet as at end of financial year (involving assets, liabilities and shareholders’ equity)

3. Statement of Cash Flows for the financial year (involving net cash flows from operating, investing and financing activities and changes in cash and cash equivalents)

These financial statements are prepared on an “accrual” basis (i.e. not on a cash basis) and are based on approved accounting standards and policies. They are then audited by external professional auditors who are required by law to give an opinion in the auditor’s statement on the “true and fair value” of the financial performance, position and condition of the company.

Our personal finance also involves the same monetary transactions that take place in an organization although the types and complexity of the transactions are different in personal finance. For effective and efficient money management, our personal monetary transactions should be managed using a proper recording system that yields the 3 foregoing financial statements that organizations prepare..

Personal finance is about:

1. Receiving cash payments for goods sold and services rendered as well as paying out cash for goods and services bought;

2. Making payments for credit and loans obtained as well as borrowing money from financial institutions; paying out interest on loans obtained;

3. Buying and selling investments such as property, stocks and shares and other types of investments and receiving dividends and interest from investments

4. Managing the cash inflows and cash outflows to ensure liquidity and solvency.

The objectives of personal finance are:

1. To achieve a surplus of revenue over expenses so that the surplus cash can be invested in the form of fixed deposits in financial institutions, short-term and long-term securities such as quoted securities and government bonds.

2. To invest wisely in property, quoted shares or other securities

3. To borrow prudently so as to make investments to increase net assets.

4. To make necessary purchases in equipment and technology so as to improve the quality of goods and services produced in generating income and reducing expenses.

5. To ensure liquidity and solvency at all times by making prompt payments for commitments and liabilities especially to the bankers and other lenders.

Let us dedicate ourselves as well as commit ourselves to prudent, progressive and proper financial management of our activities to achieve sustainable long-term growth in profitability and net assets with sufficient liquidity at all times.