Friday 24 July 2015

4 Quadrants of Money Management

I was thinking about Stephen Covey's 4 quadrants of time management, which I read in his book 7 Habits of Highly Effective People. I think that this is not only applicable to managing our time but can also be used in managing our money as well.

(Image source: http://czarto.com/2012/04/24/four-quadrants-of-time/)

Q1 would be the demands that need to be fulfilled immediately. Food, medical emergencies, water and electricity bills. These are some of the things that we would face that are both important and are very urgent as they are required for our day-to-day survival.

Q2 would be the quadrant that I would like to highlight as one that we should focus on (just like in time management). These are the important things that we should be spending our money on. Books(if you're interested in finance books, you can look at my Interesting Books page), training, insurance, these are things that may seem far away and would not affect our day-to-day living, but are able to help us improve ourselves or protect our future and are hence, important. I think that investing is also one of the uses of money that would fall into this category as it takes up cash in the short-term but helps us grow our money in the long-term and may be able to return many times of our money.

Q3 is the urgent, non-important uses of our money, which may include things such as the latest fashion, new smartphones or purchasing things at sales. They need us to act quickly or they would be outdated or would be over, needing an urgent response. But as for their long-term importance, I guess we can see that they will not have a great effect on our future.

Q4 are the things that we should not even be bothering about. These would be the impulse purchases that we occasionally make, that do not have to be purchased now due to any reason other than our own impatience and serve little to no purpose after being purchased (except for the momentary sense of fulfillment.

By organizing our expenditures according to the four different quadrants, we would be better able to organize our expenditures. The quadrants would help to highlight the expenses that are beneficial to our long-term financial health if we are able to group them correctly and make adjustments according to it

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1 comment :

  1. I believe that I am good at money management because I am the one handling our money very well.

    ReplyDelete