Money management

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For the magazine, see Money Management. For the professional management of investment funds, see Asset management.

Money management is the process of managing money which includes expense tracking, investment, budgeting, banking and taxes. It is also called investment management.

Money management is a strategic technique employed to make money yield the highest interest-yielding value for any amount spent. Spending money to satisfy cravings (regardless of whether they can justifiably be included in a budget) is a natural human phenomenon. The idea of money management techniques has been developed to reduce the amount that individuals, firms and institutions spend on items which add no significant value to their living standards, long-term portfolios and assets. Warren Buffett, in one of his documentaries, admonished prospective investors to embrace his highly esteemed "frugality" ideology. This involves making every financial transaction worth the expense:

1. avoid any expense that appeals to vanity or snobbery
2. always go for the most cost-effective alternative (establishing small quality-variance benchmarks, if any)
3. favor expenditures on interest bearing items over all others
4. establish the expected benefits of every desired expenditure using the canon of plus/minus/nil to standard of living value system.

These techniques are investment-boosting and portfolio-multiplying. There are certain companies as well that offer services, provide counselling and different models for managing money. These are designed to manage assets and make them grow. [1]

Trading and investment[edit]


Money management gives practical advice among others for gambling and for stock trading as well.[2]

Money management can mean gaining greater control over outgoings and incomings, both in personal and business perspective. Greater money management can be achieved by establishing budgets and analyzing costs and income etc.

In stock and futures trading, money management plays an important role in every success of a trading system. This is closely related with trading expectancy:






Ethical principles[edit]

Ethical or religious principles may be used to determine or guide the way in which money is invested. Christians tend to follow the Biblical scripture. Several religions follow Mosaic law which proscribed the charging of interest. The Quakers forbade involvement in the slave trade and so started the concept of ethical investment.

See also[edit]


  1. ^ Asset and Money Management Retrieved 5-08-2015. (Swedish)
  2. ^ a b Harris, Michael (May 2002). "Facing the facts of risk and money management" (PDF). Trading Strategies. Active trader. p. 33. Archived from the original (PDF) on 2006-10-17. Retrieved 2006-11-19. 
  3. ^ Gomez, Steve; Lindloff, Andy (2011). Change is the only Constant. IN: Lindzon, Howard; Pearlman, Philip; Ivanhoff, Ivaylo. The StockTwits Edge: 40 Actionable Trade Set-Ups from Real Market Pros. Wiley Trading. ISBN 978-1118029053. 

Further reading[edit]

Balsara, Nauzer J. (1992). Money Management Strategies for Futures Traders. Wiley Finance. ISBN 0-471-52215-5. Retrieved 2006-10-29. 

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