Define Financial Management

According to the Online Business Dictionary, financial management is defined as "The planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization." Clearly, while this term often refers to businesses, it does not always have to. The phrase could also refer to a church, club, team, and so forth.

As noted above, there are five main components to financial management.  Planning, directing, monitoring, organizing and controlling the money are the key elements to understand for managing your finances.

• Planning involves figuring out where money will be spent, and how much can be used for a particular event, good, project, outing, and so forth.
• Directing involves making the decision about where certain money will go. This process could involve both allocating certain amounts to specific funds or projects, as well as providing instructional information about keeping budgets.
• Monitoring involves making sure that the money goes to the right places. However, it also involves making sure that the total money of an organization does not fall below where it should be, or that the budget for a particular project does not spin out of control.
• Organizing involves setting up some sort of budget. Furthermore, if there is an event, one person or a team of people might be put in charge of collecting all of the money and then putting it into a fund at the end of the day.
• Controlling the money involves power. People in these positions might set pay rates or determine where money is used.

Of course, these sectors can all overlap one another. A person who is creating the budget might also be in charge of planning how much money will go to different sectors, and one individual might be in charge of both directing and controlling the funds.