16.0 Financially Savvy

16.1 What is "Financially Savvy"?

Financially savvy is the mentality where one's approach in managing money is scrutinized. The concept of this mentality sums up one's practice in budgeted expenditure versus actual expenditure, complemented with the practice of investing for the purpose of fund raising.

16.2 The Expenditure - Needs Versus Wants

The majority's aim is to minimize expenditure. The question is how to effectively do it? We will discuss on the approach of needs versus wants.

Basing on the hierarchy of needs by Maslow, an individual manages his/ her expenditure for needs in a very straightforward down-to-top manner. The approach for minimizing expenditure in this article is by focusing on your needs, not wants. For example, a person under certain conditions needs a car as a means of transportation. The options available for the individual though are very diversified. Therefore, the individual needs to focus in opting for the acceptable cost while at the same time matching with the conditions. The key here is to not expend over the budget. Food for thought: How is expenditure related to investment?

16.3 The Fund Raising - Investment

As much as we value on minimizing expenditure, it is equally important to value on fund raising. The approach for a household is undoubtedly through investment. There are various types of investment, and it is subjective to the individual on the type of investment he/ she opts to invest. The question is: With the on-going outflow of cash in expenditure, is there even any room for an investment? It all comes back to the purposes of minimizing expenditure, which one of them is to save money. By expending basically on your needs, you will have a substantial saving. Use that to invest for raising your fund.

I hope this topic benefits you as much as it has benefited myself, wa la hawla wa la kuwatta ila billah. Insha'Allah, the next topic will be posted in the near future.