The business of managing personal finances comes with myriad tasks. You earn, you pay bills, you invest, you write checks, you plan, you, you, you …. I think you get the idea. Handing the finances can be a lot of work for you. These tasks involved can be grouped into into three distinct and different roles that are similar to ones you might find in any professional business. I refer to the roles of my personal finance and money management business as the Money Leader, the Money Manager and the Money Handler.
The Money Leader provides the strategic leadership, vision, purpose and goals for your financial operations. He is your business' chief executive officer. If we make the analogy that successful money management is like a trip in your favorite automobile, the money Leader decides: Where are you going? What stops along the way should you make? When will you start your journey?
From a personal finance perspective, Money Leader tasks include:
- Establishing vision – What is the end state you are trying to achieve? Where are you going?
- Developing financial strategy – How do you link your Financial Ends (outcomes / desires), Ways (plans) and Means (resources)?
- Setting Goals that enable the strategy- This will drive many of the plans that are developed.
- Provide guidance and direction to the Money Manager (more on him in a moment) has he develops the financial plans necessary to ensure the plans achieve the vision.
The Money Leader decides where you are going, when you need to get there and why you're on this journey.
Middle management is the responsibility of the Money Manager who helps develop financial plans and ensures the processes of money handling are running smoothly. He has a more narrow view than the Money Leader and focuses on the details of the route our financial vehicle will take when we drive it and monitors the systems within it along the way.
The Money Manger is thinking about which highway or streets can I take to avoid traffic? How fast am I going? Do I have enough fuel to get there? How's the car running? When is the next scheduled engine maintenance? Is there anything wrong with the car that needs to be fixed right now? What kind of gas mileage are we getting? Does the motor need a tune up?
From a personal finance perspective, Money Manger tasks include:
- Developing financial plans to achieve your goals – Choosing investments, selecting insurance policies etc.
- Guiding, monitoring and assessing the execution of financial plans – Things like monitoring earnings and expenses so you can create and maintain positive cash flow.
The Money Manager develops financial plans and monitors our performance executing the plan. He seeks to improve the efficiency of the processes use to handle the details of your personal finances.
When it comes to finances, many of us wind up getting mired in the details of handling money and will feel most comfortable with our final role.
The Money Handler is the role that most people will find familiar. This role deals with the nitty gritty bits and pieces necessary to keep your financial vehicle running. The Money Handler changes the oil, adds wiper fluid, puts air in the tires, replaces light bulbs etc. To quote an English friend of mine, he "works at the coalface."
From a personal finance perspective, Money Handler tasks include:
- Paying bills – writing checks, stuffing envelopes and licking stamps.
- Making investments – filling out paperwork, writing checks or making e-transfers.
- Moving money – between accounts as necessary (eg on payday, etc.)
- Reconciling accounts – balancing checking, savings, etc.
The Money Handler accomplishes the tasks necessary to implement the financial plans that the Money Manger developed and monitors in order to fulfill the Money Leader's vision and strategy for financial success.
Each role is necessary in order to properly handle your finances. However, the Management and Leadership roles are most important as they determine what success means and how you plan to achieve it. I've often said that a "failure to plan is a sure fire plan for failure."
Unfortunately many of us get mired in the details of being the Money Handler and miss or fail to accomplish the bigger picture vision and planning tasks of the Money Leader and the Money Manager.