It therefore follows that the earlier you start managing your own money the more effective the process becomes. Too many people start that process too late in life. So rather than managing their money they end up trying to manage on the money they have. This type of approach often leads to a life of  indebteness.

In essence, any money management programme is designed to answer four questions: What are your financial goals? When do you want to achieve them? What funds do you have available? And what risks are you prepared to take to reach your targets? In order for you to avoid throwing all away and risking financial ruin and possibly bankruptcy always remember the "Golden Rule" and never gamble more than you can afford to lose!

The answer to the first question should be more extensive than most imagine. Having somewhere to live may appear an essential rather than a financial goal. Yet buying a house is the single biggest financial transaction most people undertake. How much is invested in a property will have significant implications for any money management programme. Remember, owning your home is not essential, no matter how idealistic it may seem and can be fraught with hidden financial dangers.

Lifestyle questions

Identifying financial goals will also lead people to answer lifestyle questions. If a luxury holiday is an essential part of life then there will be less cash available for savings and investment. Sound money management does not prevent you from going on holiday it merely sets priorities and puts a cost on your choices. If you have to use your credit card to fund it, do you really want to pay the price of your holiday for the next 10 years? 

Once the goals are set then timing questions must be addressed. Retirement is an obvious issue but when do you want to quit work? What about current liabilities and commitments? As you peer into the future your funding timeline will emerge and you can begin to assess your savings and investment needs. If you fail to plan for your financial future, you may be forced to carry on working until well after the normal retirement age or find yourself burdened with overwhelming debt.

How successful you will be at meeting those timing goals will depend on how much surplus cash there is once you have met your day-to-day living expenses. The free cash is available for financial planning. But do not forget your existing assets and liabilities. These could be reorganised, refinanced or even sold to liberate funds, or reduce expenses.

Investing spare cash

Once the surplus cash has been identified then you must decide where to invest. That will require specific advice but before seeking counsel it is important that you establish your own risk profile. The more risk you are prepared to take with your investment cash the greater the reward. There is an important balance to strike.

Having answered the questions and set in place your money management plan it is essential to monitor and review progress. Perhaps your day-today expenses budget was too restrictive. Perhaps your earnings potential is higher than envisaged. Perhaps some of your goals are too ambitious.

It all takes time but this is an investment which costs little and yields much.