| Who adopts moderation never face insolvency | | | | multiple unjust social pressures. A balance family life is |
| (Al-Hadith) | | | | best fence against unfair social pressures on |
| Be generous but not extravagant; be frugal but not | | | | consumption patterns. Moreover, a joint saving or |
| miser (Ali - R.A.) | | | | spending plan by family members gives social regard |
| (A Practical-Rational Approach on Effective Liquidity | | | | to family members and enhance their social |
| Use) | | | | effectiveness. |
| Introduction - Advent of Money | | | | Structure of an economy is designed, voluntarily or |
| Human life is divinely designed phenomenon of | | | | involuntarily, by countless economic agents such as |
| interdependent, interconnected, and interlinked | | | | importers, exporters, sellers, distributors, investors, and |
| individuals. Individuals have multiple needs and desires. | | | | consumers. Generally, saving or spending patterns of |
| The satisfaction of needs and desires of a person are | | | | economic agents plays a decisive role in shaping up a |
| linked with proactive attitude of self and reactive | | | | specific economy; it is either production-oriented or |
| behaviour of others. For example, the more ease you | | | | consumption-oriented. A saving-oriented approach of |
| provide to others the more ease you attain for self, | | | | individuals shapes production economy, while a |
| the more respect you give to others the more respect | | | | spending-driven approach of individuals shapes |
| you get for self, the more strength you supply to | | | | consumption economy. Consumption economies are |
| others the more strength you find for self, and so on | | | | lavish or generous towards spending, while the |
| and so forth. The autonomous satisfaction of needs | | | | production economies are scanty or moderate |
| and desires is not feasible. People support each others' | | | | towards spending. A saving or spending approach of |
| needs/desires generally willy-nilly to attain maximum | | | | individuals towards money management is determined |
| level of satisfaction for self. The support system or | | | | by propensities. A propensity is inner inclination of an |
| sharing structure among persons works on every | | | | individual towards saving/spending. The saving pattern |
| aspect of life. The sharing during economic interactions | | | | of individuals is determined by propensity to save. A |
| provides basis to money creation. | | | | high level of propensity to save prevails in production |
| The sharing phenomena of human beings during | | | | economies of the globe such as China, Japan, and |
| earning-spending part of human life shape economic | | | | Malaysia. The consumption pattern is determined by |
| aspect of society. Economic aspect is outcome of | | | | propensity to consume. The higher level of propensity |
| countless interdependent economic agents. The | | | | to consume indicates the consumption economy. The |
| sharing activities during some economic struggle need | | | | prominent consumption economies are USA, GCC, and |
| a medium of exchange. Historically, economic agents | | | | Pakistan. Economies with irrational propensities face |
| adopted various exchange approaches to attain just | | | | recursive liquidity crises due to economic miscreants; |
| economic dealings for needs satisfaction such as | | | | they exploit over-spending or over-saving patterns of |
| barter approach, silver coinage, gold coins, paper | | | | individuals. Islam provides a feasible solution to high |
| money, and plastic cards. Presently, man use paper | | | | consumption economies through motivation for |
| money and credit cards. The new techniques were | | | | generosity; a generous spending is compatible with |
| opted because the old systems were creating some | | | | rational production-patterns. A miser economy can be |
| practical problems due to exploitative human | | | | improved through moderate spending modal. Again, |
| tendencies; the aim was to avoid injustice from | | | | Islam provides a feasible solution to high saving |
| economic life. The system has been accepted at all | | | | economies and motivates them towards moderate |
| levels of life and at all regions of globe. But, the | | | | spending; a moderate spending is compatible with |
| evolved system is not ideal or exploitation free due to | | | | rational consumption-patterns. Rational propensities are |
| interest-based transactions or inappropriate exchange | | | | inevitable for stable economies. It is noteworthy that |
| rates. Maneuvered interest rates or manipulated | | | | human propensities are shaped or refined by |
| exchange rates are generally used by industrialists | | | | intellectuals, leaders, and opinion-makers. |
| capitalists persons/nations to design inappropriate | | | | Persons are inevitably inhabitants of some state. |
| purchasing power parities. The tilted parity hits hard the | | | | States are governed by politicians. A short-sighted |
| general public ultimately the purchasing power of | | | | political class or volatile political structure creates mess |
| consumer is reduced due to financial maneuvering of | | | | and confusion at all levels of life, obviously, |
| banking system, both national as well as international. | | | | consumption patterns or production patterns of |
| Significance of Money - Individual & Institutional At | | | | peoples are disturbed. A buying or spending behaviour |
| individual level money is spent on some needs such as | | | | becomes volatile due to persistent political uncertainty. |
| food, clothing, shelter, transportation, health, security, | | | | Volatile consumption/production patterns damage the |
| and education. The basic needs are limited but | | | | money flow/value of money so that inflationary or |
| luxurious/aesthetic human nature is inclined towards | | | | deflationary situation is mushroomed. State is unable to |
| countless paraphernalia of life such as diverse tasteful | | | | maintain stable price level due to economic miscreants |
| food, attractive clothing, magnificent housing, influential | | | | consequentially, people face liquidity crunch. Economic |
| VIP security, better education, superior medical facilities, | | | | miscreants are either lavish or hoarder. They challenge |
| and so on and so forth. The genuine needs and | | | | the writ of state through maneuvered spending or |
| necessary aspirations can be met amicably through | | | | hoarding, now and then. |
| sensible consumption patterns; enormous amount of | | | | Prominent Consumption Habits |
| money units is not essential. But, practically, individuals | | | | People adopt or depict multiple attitudes towards |
| adopt irrational consumption patterns such as | | | | money management. We may categorize them into |
| conspicuous consumption, impulse buying, and careless | | | | four styles - Miser, Moderate, Lavish, and Generous. |
| shopping. Capitalist manipulates extreme consumption | | | | Moderate and generous life styles are positive or |
| patterns and reaps benefits of conspicuous | | | | constructive while miser and lavish life styles are |
| consumption. The interest-oriented approach of | | | | negative or destructive. Moderation and generosity |
| capitalist towards money usage ignites extreme | | | | promotes stability and growth, while misery or |
| consumption patterns of individuals. On the other hand, | | | | lavishness promotes volatility and decline. A moderate |
| the contentment-driven approach of consumers | | | | person spends according to available means and |
| develops moderate consumption pattern. A moderate | | | | maintains cash reserves, generous person spends on |
| approach towards money management is | | | | others and maintains moral courage, miser spends only |
| time-honored tool against financial maneuvering by | | | | on inevitable needs, and lavish spends according to lust |
| interest-oriented banking system / lenders. | | | | brain impulse. A better Money Management gives |
| At institutional level money is required to produce | | | | stability to individuals during some money crises and |
| goods and services for sale. Money units are used to | | | | growth during normal time. |
| calculate worth of goods and services. Liquidity is | | | | Some Practical Mistakes during Saving/Spending |
| needed to initiate, operate and develop the business | | | | An effective money manger defines her spending |
| institution. Liquidity is just like fuel in a vehicle or | | | | demands as needs or important, facility or less |
| electricity in a bulb or blood in a body. There are two | | | | important, aesthetics or least important, luxury or |
| major dimensions of liquidity management. One is the | | | | unimportant. In addition, an effective money manager |
| source of finance and the second is its effective | | | | adopts some prudential financial techniques to attain |
| utilization. Lack of money creates frustration at multiple | | | | maximum benefits such as precise |
| occasions of business transactions. Again, an | | | | income-expenditure assessment, priority setting of life |
| interest-oriented approach of some institutions, esp. the | | | | goals, financial planning, rational execution of plan, and |
| financial institutions, diverts the money towards wrong | | | | finally evaluation & adjustments. Practically, the |
| channels. The solution of the problem is to convert | | | | saving or spending decisions may be incorrect due to |
| interest-oriented approach into profit-driven approach. | | | | some false assumptions or wrong expectations or |
| The interest-driven approach calculates the | | | | crude guesstimates or momentary mistakes. The |
| money-units and takes them as decisive factor during | | | | prominent mistakes are: |
| some decision-making process, while the profit-driven | | | | No Cash Reserves. |
| approach considers the productivity of input units and | | | | Inappropriate Use of Credit. |
| value of output as final factor. A profit-driven effort is | | | | Non-Constructive Use of Windfalls/Bonuses. |
| dominantly entrepreneur-driven or knowledge-driven | | | | No Provisions for Large Yearly Expenses (e.g., Tax |
| economic struggle. The ultimate outcome of | | | | Payments). |
| entrepreneur-driven or knowledge-driven economic | | | | Underestimating the Cost of Ownership (e.g., Car |
| effort is better return to all stakeholders, rapid | | | | & House) |
| economic growth rate, sustainability, and higher level of | | | | Spending Leakages (e.g., Impulse Buying). |
| employment. A knowledge-driven/entrepreneur-driven | | | | Non-Economical Shopping. (e.g., Small Shopping) |
| institutional setup is now a global economic reality. | | | | Careless attitude on Small Savings |
| Continual Cash Flow | | | | Casual behaviour on Small Spending. |
| The continuous flow of money or cash-flow is vital for | | | | Money Management and Entrepreneurship |
| smooth economic life. The continuous flow of money | | | | Maximization Principle is inevitable for life struggle; both |
| is achieved on account of certain beliefs and specific | | | | individual as well as collective. An individual effort is, |
| actions. The belief system develops mindset of an | | | | normally, towards maximization of personal ambitions. |
| individual. A mindset has power to attract or repel | | | | For example, an entrepreneur wants to maximize |
| supportive environment. A positive mindset attracts | | | | profit, a consumer wants to maximize satisfaction, a |
| fruitful opportunities and repels harmful threats; | | | | philanthropist wants to maximize public welfare, a |
| consequently, a supportive working environ is available | | | | politician wants to maximize statutory powers, a |
| to a person. A supportive environment can be used | | | | worker wants to maximize productivity, and so on and |
| for sensible earning; moreover, a rational earner is | | | | so forth. The institutional efforts are, too, towards |
| either firm or flexible and spends life with reasonable | | | | maximization of something. Institutions have certain |
| belongings. On the other hand, a negative mindset | | | | goals & objectives and pursue its maximum |
| repels fruitful opportunities and attracts harmful threats | | | | actualization. The individual efforts towards |
| so that meager or volatile earning is materialized. An | | | | maximization is sometime self-contradictory or |
| irrational personality is inevitable consequence of | | | | inconsistent with working environ, consequently a |
| meager or volatile earning; an irrational earner is either | | | | failure is realized. Leadership/Entrepreneurship is |
| rigid or volatile and spends life with meager or volatile | | | | needed to avoid inconsistencies for better |
| resources. The prominent damaging beliefs that hinder | | | | performance. A productive use of resources is |
| continual money flow are - money is panacea for all | | | | essential for better institutional performance. Wrong |
| problems, money is evil, availability of money makes | | | | usage of resources creates leakages; a leakage |
| miser or lavish, money promotes inhumane emotions, | | | | produces less than optimal results on entrepreneurial |
| money disrupts inner satisfaction, availability of money | | | | efforts. |
| attracts greedy peoples, and conspiracies are | | | | Crises Management is essential aspect of any |
| designed against wealthy peoples. It is inevitable to | | | | entrepreneurial struggle. It is required to prevent crises |
| replace negative beliefs with positive beliefs for | | | | or to manage crises amicably. Crises Management |
| promising financial opportunities. The second element | | | | guides how threats are converted into opportunities, |
| that disturbs the continuous money-flow is wrong | | | | how weaknesses can be made irrelevant, and how |
| behaviour-pattern. The prominent wrong actions or | | | | strengths are used optimally. Liquidity Crunch is |
| behaviour-patterns against cash flow are - time | | | | expected phenomena of business life. Liquidity or |
| wasting, arrogance during dealings, impulse buying, and | | | | cash-in-hand fulfils countless requirements of |
| conspicuous consumption. | | | | entrepreneur. Liquidity crunch creates conditions of |
| Damaging Of Cash-Flow | | | | urgency at institutional level, it demands courageous |
| The continuous flow of money is disturbed due to | | | | and non-egoist position by entrepreneur. Courage |
| multiple reasons such as personal weaknesses, social | | | | means pragmatic approach towards threats and |
| injustice, economic exploitation, and political turmoil. | | | | weakness, while the non-egoist stand means realistic |
| People have great desire for wealth accumulation due | | | | approach towards opportunities and strengths. |
| to manifold reasons. The ingrained desire provides a | | | | Moreover, liquidity crunches leads towards urgent sale |
| continuous motivation to individuals for wealth | | | | of marketable item for ready cash. An urgent sale is |
| accumulation. Some people have hasty/greedy | | | | generally a wrong sale. It is noteworthy that urgent |
| approach towards wealth accumulation; they want to | | | | efforts normally rectify the mistakes of others. |
| increase wealth by hook or by crook. A weak or | | | | Income from profits, windfalls, and gifts is personal |
| non-resilient approach towards avarice people is the | | | | income of entrepreneur that can be consumed or |
| paramount reason of disturbed cash flow. | | | | saved. A volatile earning disturbs one's life pattern. A |
| A social interaction is essential aspect of human life; | | | | volatile earning of entrepreneur is outcome of multiple |
| none can escape from it except frenzy. Personal life | | | | reasons such as non-optimal spending pattern, wrong |
| patterns are extremely influenced by society. The | | | | time management, miscommunication or wrong dealing, |
| lavish/miser spending is dominantly determined by | | | | and low morale during socio-economic interactions. |