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Are You a Macro or Micro Personal Finance Person?

You must have heard the terms micro and macro in economics, but must be confused about how one can be a micro or macro-finance person. Well, you can easily identify by considering whether you look at your finances in the big picture or get down on every nitty-gritty. Consider whether you look at your assets and spending or look at every expense made separately. However, if you are still not clear, no worries after reading this piece of writing, you will be pretty clear whether you are a macro or micro personal finance person. 

A Micro Personal Finance Person

For personal use, most individuals focus on micro personal finance management mechanisms. You keep an eye on every expense and evaluate what went well and what did not go well. It is an easy method for some individuals but for others not that easy. Even if you are a freelancer, a paystub generator allows you to keep track of every expense. As a micro-management person, you may also evaluate what amount of money you are willing to pay for any item and how much you can save by not spending it.

This method is made for disciplined and frugal persons who can easily curb spending temptations. This method is not ideal if you cannot control yourself from spending the money. As everything carries cons as well, the following are few disadvantages you will experience if you are a micro personal finance person.

  • Time-taking 

Using a micro method, is time taking as you will be evaluating every expense and it will end up taking up a great amount of time. Well, if you have a busy schedule you can hire independent contractors who will manage all your expenses. No matter how much time you will spend, you will end up saving a huge sum of money.

  • Frustration

If you are a person who becomes frustrated easily, then micro-financial management is not your piece of cake. As when you evaluate every expense and see how much more you have spent from the set budget, you will end up being frustrated. You may also feel frustrated when you will have to sacrifice certain things by not purchasing them and saving a few bucks. 

Under the micro view of money management, you can set an amount you will be saving every month. For instance, you are planning to save $100 every month. No need to save it all at once but you can break it down into pieces. You can save a few dollars on each purchase you make or can save a huge sum by not purchasing one big expensive item.

A Macro Personal Finance Person

The macro way of handling finances is utilized by businesses and companies. As there are various management tiers and countless spending, it is not easy for one person or one team to look at every expense and analyze it. Therefore, in companies, various departments/function teams meet and discuss the budget for the coming year as well as evaluate what is met and what is underspent. 

However, various individuals also follow the same method for managing their finances. They develop various expense categories and then set a budget for each category. They keep on spending the budget on that expense category till the set limit. If you are using this method for personal financing, it can end up in a positive result.

There are two drawbacks if you are using this method for personal financing.

  • Flexibility

You may not be able to easily manage your expenses if you are not a much-disciplined person as you will only focus on the overall budget. This formula will not work if you are about to purchase a big item. For instance, what if your car suddenly breaks down and you have to purchase a new one. No one is going to keep a monthly budget for purchasing a new car. There can be exemptions but still, it can end up in a disaster as well. However, there is still a way to cope up with the situation by keeping maintenance or miscellaneous costs every month. 

  • Not to spend too close to limit

By setting a limit, most people are urged to spend maximum within the set limit. For instance, you have kept $400 for each category and only one week left from the month end but your entertainment budget is still 20% spent. In this scenario, you will urge to spend more in the last week to meet your budget limit set for entertainment. 

Final thought

In general, if you want to know which is a good method for money management then we will recommend that a mix of both the methods would be perfect. You can choose a macro view of money management for some budget categories and can go for a micro view of management for other budget lines. However, you need to be consistent and resilient in following the set financial plan. You need to curb your need for instant gratification and need to consider the long term benefits of saving money. Your routine work and expenses make up your micro money management method whereas your long term goals hold the pieces of the macro money management system together. Start setting your budget today and capture your spending.

 

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