10.5. Control in Money Management

After planning, controlling is the next step in money management. Control in financial management is usually of two types: checking to see how well the plan is progressing and adjusting wherever necessary.

In money management, once you have created a budget through planning, the next important step is controlling your finances. This means regularly checking to see how well you're following your budget and making adjustments when things deviate from the plan. It's crucial to have both a clear understanding of your progress and the flexibility to make necessary changes.

Imagine you are on a road trip with a set route (your budget). As you travel, you might hit some unexpected roadblocks (unexpected expenses) or find great new attractions to visit (opportunities to spend). You need to check your current location and determine if you should stick to your original route or take a detour. This is similar to how you manage your finances — checking your progress and adjusting your plans appropriately.

Checking is important as it tells how one’s plans are progressing and where adjustments are needed. There can be two kinds of checks: (i) Mental and mechanical checks (ii) Records and accounts.

In controlling your finances, there are two types of checks that can help ensure you're on track. First, mental and mechanical checks involve visualizing your expenses and keeping a physical cash limit for specific categories; for example, if you set aside a certain amount of cash for groceries, you can directly see when you're spending too quickly. The second type involves keeping detailed records of all expenses so you can compare them to your budget and see where you've spent too much or too little. This systematic approach allows you to identify any necessary adjustments.

Consider a student managing their allowance. They might mentally note they can spend only a certain amount on entertainment. They also might keep a small envelope with cash dedicated to outings — once the cash is gone, they know they’ve hit their limit. Additionally, if the student keeps a diary of all their expenses, they can review it weekly to understand where they overspent and adjust future budgets accordingly.

Advantages of record keeping for a family include comparing monthly expenditure with the spending plan, identifying high or low expenditure categories, and maintaining proof of payment.

Keeping detailed financial records is crucial for effective money management. By documenting all expenditures, families can compare their actual spending against their planned budget. This helps identify which areas have excessive costs and may need to be dialed back. Additionally, having records provides proof of purchases, which can be important if there are issues with products or services received.

Think of a family that keeps a handwritten journal of groceries purchased each month. By reviewing this journal, they might realize they are spending too much on snacks. With this realization, they decide to reduce their snack-buying and reallocate that money to fruits and vegetables instead. The journal serves as both a budgeting tool and a way to advocate for healthier purchasing choices.

Adjusting the plan is very important to keep it on track. Adjustments may be needed if the original planning was poor because of factors beyond the family’s control.

An essential aspect of controlling your money is the need to adjust your spending plan as circumstances change. Sometimes unexpected events occur, like a medical emergency or urgent repairs, that require immediate reallocation of funds. If such adjustments are not made, the family risks overspending or running out of money before the next income arrives.

Picture a family going on a vacation that suddenly needs to deal with an unexpected car repair. They're faced with a choice: will they stick to their planned vacation budget, or adjust it to account for this emergency? By examining their overall budget and finding areas where they can cut back, like dining out less during their trip, they can adjust their spending while still enjoying their vacation.

Evaluation is the final step in money management. The satisfaction derived from expenditures is one of the most important means for determining the success of a budget.

After conducting checks and making necessary adjustments, the final step in money management is to evaluate the entire process. This means analyzing whether the family feels satisfied with their spending and if they were able to meet their financial goals. The evaluation involves looking at different aspects, such as whether they paid bills on time, saved for future needs, and improved their overall financial situation.

Imagine a family that set a goal of saving money for a vacation by cutting down on dine-out meals. After a few months, they review their savings, and if they see that they’ve successfully saved enough and feel good about cutting back on meals out, they consider this a success. However, if they are feeling deprived and unhappy about their financial choices, they may reassess their budget to find a balance between savings and enjoying life.

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