The concept of time as it relates to money management is a necessary factor for individuals who are running a budget and professional investors who oversee assets on behalf of clients. Money management requires patience, but there are also some practical steps to take in order to remain on course with a plan to reach an ultimate financial goal. Time and money management go hand in hand and, when used properly, can lead to financial success. For instance, time provides context for historical behaviors, while money management offers hope for a prosperous financial future.
Professional money management requires some time horizon to be established in order that the portfolio manager knows whether or not an investment portfolio performs according to a certain expectation. Even experienced investors cannot predict the precise movements in the financial markets, but by taking a look at historical returns, or profits, future expectations can be set realistically. Time and money management can complement one another as individuals review past performance of a certain investment category and make current and future decisions based on those patterns.
Investors who allocate money to professional mangers should also be willing to exhibit patience in earning returns. Some investment professionals, including hedge fund managers, require that investors keep money invested for a minimum period of time, known as a lock-up period. By preventing withdrawals for a period of time, the money manager is giving the investment strategy a chance to work and is attempting to reward investors with the greatest possible returns. It is necessary for both time and money management to be accurate in order for this approach to be most effective.
Successful personal money management also requires a degree of patience coupled with smart habits. It is a good idea in personal money management to establish goals and a time line for those milestones. By doing this, time and money management should work to an individual's advantage. Saving for retirement, for a car, or for a vacation home are all goals that can be attained with time and money management, for instance. Outlining those expectations and assigning a time horizon will dictate the type of household budget that may need to be created and areas of spending that can be improved.
It is also possible that it will take time to become successful at money management. Whether investing on behalf of others or for an individual, unexpected events can occur in the economy and in individual households. Sometimes, it's possible to plan for these events, but other times, even prudent money management cannot prevent losses.
