Now, investment and financial management have become a "buzzword" for people. Whether it's young people just starting their careers or aunties shopping at the vegetable market, they can share a few experiences of investment and financial management with you.
Everyone talks about investment and financial management, but have you truly understood its meaning?
Although everyone is talking about investment and financial management, there are not many people who can clearly explain what it is. Or rather, what is investment? What is financial management? And what is the relationship between the two?
To clarify, it might be difficult for some people. Some might say that investment and financial management is about making more money, saving more money, and letting money generate more money.
That's somewhat close, but not entirely accurate. In other words, this is only a small part of investment and financial management.
If understood literally, financial management is the management of money. To extend the concept a bit, it is about managing finances and wealth with the aim of preserving and increasing the value of wealth.
People usually talk about financial management and investment together because they are closely related, but they are by no means the same thing.
Financial management is about planning and purpose, which is related to happiness, while investment is a means, related to success or failure.
In my understanding, the scope of financial management is broader. Financial management is like making a plan for our entire life, of course, this plan is closely related to wealth.For instance, as we are just stepping into the workforce, we may soon face the issues of getting married, starting a family, and buying a house. Regardless of which, they all require us to have financial support.
At this point, we need to make certain plans and take corresponding practical actions. For example, if the various costs of getting married amount to 500,000 yuan, and your salary is 10,000 yuan, how would you achieve the goal of saving 500,000 yuan within 5 years?
Without planning, this seems very difficult to achieve, but with planning, it becomes easier.
First, you need to reduce your expenses, for example, by limiting your spending to 3,000 yuan and saving 7,000 yuan each month. In this way, you can save 84,000 yuan per year, and after 5 years, you will have 400,000 yuan in savings.
There is still a gap to reach 500,000 yuan, so you need to find ways to increase your income. Either work hard to strive for a promotion and raise within 5 years, or take on a part-time job to have an additional source of income.
In summary, you must try every possible means, break down your goals, and achieve them on schedule, and this entire process is the process of financial management.
Of course, getting married and buying a house is just one phase in our lives. We have many phases in our lives, each with different financial needs, and all require corresponding financial planning.
For example, the expenses for raising and educating children, retirement costs, travel expenses, and so on, all these areas that require money, we need to plan for them, and this planning process is financial management.Having discussed financial management, let's now turn to investment. Comparatively, financial management focuses more on planning, while investment emphasizes action and outcomes.
For instance, if we make a financial plan to buy a house, aiming to save 500,000 for a down payment over five years, we can save money or invest in funds, stocks, and financial products to let them appreciate, thereby achieving wealth growth.
Our actions of purchasing funds, stocks, and financial products constitute investment, and through investment, our wealth grows, enabling us to achieve life goals and ultimately fulfill the purpose of financial management.
To put it metaphorically, financial management is like a head of state formulating strategic plans, while investment is akin to several military commanders completing one battle after another. Only with victories in each battle can the strategic objectives desired by the head of state be ultimately realized.
Financial management is a lifelong behavior, and investment requires seizing the right timing.
Financial management is something that accompanies us throughout our lives, without strict time limits. It can also be said that children should start receiving financial education from a young age, gradually understanding what money is, how to save, and how to delay gratification.
A retired elderly person should also understand financial management, ensuring the safety of their wealth and allowing it to generate new income to the greatest extent, so that their later years can be comfortable and dignified.
I recall when I was in high school, my mother would cut the grapes from our garden and sell them at the market. At that time, I didn't quite understand why she did this.
Now I understand that it was because I was about to go to college, and my mother was doing this to prepare for my college tuition. This was the financial management concept of my mother's generation.Times have changed, and many people now instill the concept of financial management in their children.
My child is in junior high school this year. In the past, every Spring Festival, he would receive some lucky money, which he would spend on buying toy guns one day and small cars the next.
Starting from last year, I began to guide him to save. He would save his lucky money and pocket money, and when he wanted to buy something, I would first ask him, "Can you buy it with your own money?"
He would also seriously take out his savings and count them, then make a plan. For items that he really needed to buy, I would guide him to make a savings plan, and once the plan was achieved, he could buy what he needed.
Through such guidance, the child would not spend money indiscriminately. He would gradually understand the principle of delayed gratification and use money where it is most needed.
In fact, the biggest difference between investing and financial management is that financial management should last a lifetime and accompany us throughout our lives, but investing is not the same; it must be timed correctly. If we reverse the two, not only will we not achieve good results, but it is also likely to backfire.
Take the current stage we are experiencing as an example. The United States is likely to experience an economic recession, and in the context of high economic interdependence, none of us can be immune.
But even in such a poor economic environment, we still need to manage our finances, or rather, we need to manage our finances even more. We must plan our income and expenses well to get through this economic winter.Regardless of whether the economic environment is favorable or unfavorable, we all need to engage in financial management and continue to do so persistently. However, during this time, investments should be approached with caution. For the bigwigs in the investment world, they might seize the opportunity to buy at the bottom. But for the majority of ordinary investors, investing now, whether in real estate, stocks, gold, or crude oil, carries significant risks.
This is the biggest difference between financial management and investment: financial management should always be ongoing, while investment requires timing. In summary, financial management is a lifelong practice for everyone. It cannot be rushed, nor can it focus solely on high returns; instead, it requires the establishment of a long-term plan and a steady, step-by-step progression.
