14
Apr
2020

Understanding Money Management

Money management entails spending, budgeting, investing, saving or in another way methods employed in overseeing the finance inflow/outflow of a person or firm. In relation to the financial markets, the phrase “money management” connotes an investment expert that carries out decisions regarding investment for a massive chunk of cash, for example pension plans or mutual funds.

Just as experts in the field of financial investment make do of the phrase, individuals as well carryout some form of money management as regards their personal income. Money management services can be obtained in a lot of forms, one of which can come in the form of non-aggressively managed mutual funds with small fees to concise consulting and mortgage planning.

If you want to trade online, invest, manage loans and mortgage, etc. you sure do need to be able to formulate a money management plan that’s encompassing enough. This will give you an overview of how much capital you’ll need to pool in on your investment or trade. Risk too much and this may mean pilling up losses, which might eventually hinder you from trading in the future. Put in to too little and this may as well mean that you’ll not be able to attain your full potentials to make money from the markets.

When trading online it is important to observe some couple of things, one of which is the fact that you liable to lose on any trade. Armed with this simple idea, you can then be able to enter every trade cautiously, without risking more than you’re comfortable with losing. If you’re devoid of this mind set, then it means in the event of hitting some form of losses, you’ll get that urge to make the money back, which will inevitably lead to more minuses.

Whatever you do while trading, ensure that you do all in your power to preserve your working capital. One of ways this can be achieved is by not over trading, which in itself is a result of not having a well laid out trading plan. For investors who have fully mastered their trading strategy and subsequently turned it into a concise plan, then there should be no reason for over-trading when indicators are not signalling an entry or exit.

On a personal finance level, it is advisable to set specific goals that are measurable say in a year, two years, seven years, or even longer. For one to able to establish a rich money management technique that on their personal finance, here are some tips on that:

– Individuals should endeavour to set an emergency fund aside for the rainy days.

– It is wise to pay off debts owed on credit cards, as inability to do so in the long term could mean them accumulating.

– If your employer has a retirement plan, then you should support it. If none is present, then you should set up one like the IRA and contribute accordingly.

– Ensure that no debts are left on your mortgages.

– Strive towards attaining financial independence at a specified age.

– Set up a diversified investment portfolio.

– Scale down on taxable income.

– Set up your children’s college funds.

Loans and mortgages can be a good way towards attaining some level of financial leverage, but inadequate money management technique can ruin this as well. Such borrowed income/assets should be tracked, along with the expenses accrued via a budget form, spreadsheet application (Excel), and a host of other program.

Money management should be administered on investments that suits your risk tolerance. However, individual ethical or religious principles may be employed as a compass in determining how they manage their investments. Muslims for instance, practice Islamic banking, while Christians tend to practice biblical scriptures and so.

Ivan Lutchkov for FXOpen Forex broker in UK.

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1 Response

  1. In a nutshell, money management is not about living frugally but within means, making sure there is enough funds set aside for savings and investment 🙂

    Great article! Thanks

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