The importance of financial management is so huge that its impact in an economy is instantly felt whenever changes is made to prevailing financial management process of a system.
Financial management is the process of actively seeking the best way of handling our dealings that involve finances. This article on the importance of financial management is written to explain in plain language, the benefits and gains of having a functional and reliable ways of handling your financial matters.
The functions of finance is now pervasive as you will find in this article. The rest of this post will now be used to discuss the importance of financial management in our modern world.
Uses of financial management in our modern society
1. Economic Growth and Development
Quality financial management is the main force behind economic growth and development. Resources are easily multiplied when properly managed and financial management is all about taking care of scarce resources while at the same time seeking ways to increase the value of the resources
2. Improved Standard Of Living
The standard of living of an individual is measured by his or her income, ease of access to good things, and the general lifestyle of the individual. Standard of living can generally be improved by a person’s ability to attract and retain wealth. Without proper management of finance through financial management, wealth may not be attracted talk more of being retained.
3. Reduction of the Potential Financial and Economic Global Crisis
That we have been able to come out of various global financial crisis that mankind has known is largely due to the application of proper financial management techniques. Financial engineers rally round to seek solution to any financial crisis.
Although many argue that the financial crisis are caused by financial engineers in the first place but what really matters is that financial management as a discipline has been able to help alleviate various problems of global financial crisis.
4. Job Creation
The world is not in want of people with the title ‘financial manager or financial adviser’. These people would not be in employment if not for the fact that we have a thing called financial management. Financial management does not only create jobs directly but also indirectly.
A company whose finances are well managed will not only survive but expand thereby creating more jobs. Option and derivatives traders are just some of the career opportunities that the field of financial management has made possible.
5. Aid Planning
Companies engage in financial planning in order to help increase shareholders wealth. Financing gaps for example are identified through financial management technique known as gap analysis. Based on the outcome of this process, plans are then made to raise finances that will help offset the identified short fall.
6. Risk and Uncertainty Management
Financial management as an offspring of economics have been able to develop hybrid risk management tools and framework that has benefited all works of life. In the bid to create low risk financial environment, players in financial management arena have developed powerful tools to manage both financial and business risks.
7. Wealth Redistribution
Financial management that is supercharged with fintech have made it possible for us to now have many first generation millionaires and even billionaires, through astute application of sound financial management techniques, individuals that would have remained poor have escaped poverty.
Every economy that is the envy of all and sundry is built on solid financial management. Like a wise man will say; show me a prosperous and wealthy nation and I will show you bundles of financial planners with guts.
It is evident from the above points that the importance of financial management in our lives cannot be downgraded in any way. Remove proper and disciplined financial management and see the world go back to the Stone Age.