If at the end of every month you are lucky enough to save money, after all your expenses, then this money probably gets put away in a savings account or builds up the balance in your current account. If you are using a current account to have your salary paid in to and then also have a savings account to hold some of your extra cash then what you have is the beginnings of a well structured portfolio. All you need to do is make a couple of tweaks and you’ll be home free. Here is how.

I once heard these next few items referred to as the pantry, the fridge and the freezer. I’m going to be a little more obvious and call them a cash reserve, short term money and long term investments, but we’ll go along with the kitchen analogy as well.

Current Account

If we start with the place your money first comes in to being. So you’ve been paid and your money is in your current account. Most people will have a rough idea of what they spend and save each month. The best thing to do is leave in your current account what you need to spend on bills, food, rent, mortgage etc and then transfer the remainder to a savings account or ideally two. Following the culinary example I guess this would be the supermarket where you pick up your weekly or monthly supply. The reason you split your savings in two is explained below.

Cash reserve

So you’ve transferred some of your surplus cash to a savings account. This is great. You are now building up your cash reserve. This will be money that you never touch. Money that you know is there in case of an emergency but you never rely on for normal expenditure. You will only need to build up this reserve for as long as it takes to get to the level you want it at. Set yourself a target. Some people consider the equivalent of six months’ expenditure of three months’ salary a good level. Some like round numbers, say ?10, 000, ?20, 000 or ?50,000. It’s really up to you. This would be the pantry in our little example. The place you come to when there is no other food around and you know there will always be something you can lay your hands on during hard times (i.e. when the food shopping hasn’t been done).

Short Term Money

The other place you send your savings to is your short term money savings account. This will hold money that you can spend whenever you want to. You can use this account to save all the surplus cash you have after paying your bills and saving some towards a cash reserve. Some people use this type of account to save up for certain expenditures like a holiday or a car. Use this account to dip in to whenever you fancy spending some money, whether expected or unexpected. This would be your fridge. The amount you want to build up is entirely up to you, whatever makes you feel comfortable.

Long Term Investments

Then once you are happy that you are building up a cash reserve, or have already done so, and are putting away money for short term expenses on a regular basis you can also start to think about your future. Long term investments are an important part of anyone’s planning. Regardless of what you choose to invest in the need for investing in your future should take a high priority.

Long term investments usually have two purposes, either to make a bit extra or to save for your future. Both are more than worthy reasons to invest money. A lot of people use an ISA or personal pension to save for their future. many also use an ISA to invest in shares, funds (e.g. unit trusts) or bonds etc.

If you can stick to these basic elements of building your portfolio you will see that it doesn’t need to get complicated at all. In the above example you wouldn’t need any more than a current account, two savings accounts and some investments like an ISA or personal pension. In practice many people have a lot more accounts and plans than this. It’s not really necessary in all honesty. Please note that the above information does not form a personal recommendation as individual circumstances will always dictate what is best for you as a person.

By: Jaskarn Pawar

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Every successful business has a Risk Management Plan.

And Stock Trading is a business!

Every prudent business-person wants to first cover his overhead expense each month, and then concentrate on achieving a steady growth in earnings.

Rather than striving for the big hit, they protect capital first and work for consistent returns and take more aggressive risk with a portion of profits.

Not accidentally, the big hits and home runs still come along, but they come along without excessive risk.

The stock trading Business Philosophy is based upon 3 principals (in order of importance):

1. Preservation of Capital
2. Consistent Profitability
3. Pursuit of Superior Returns

In other words, preservation of capital…leads to consistent profits…which makes pursuit of superior returns possible.

This is a risk management plan, and this is how you build wealth.

Preservation of capital and money management is the cornerstone of stock trading. Risk is the prime concern.

Before asking “what kind of profit can I make?”, ask first “what potential loss can I suffer?” This astute financial risk management.

A storekeeper takes a risk every time he stocks new merchandise. If it does not sell, he will lose money. A smart businessman takes only risks that will put him out of business even if he makes several mistakes in a row.

As a stock trader, you are in the business of trading. You need to define your businessman’s risk – the maximum amount of money you will risk, or lose, on any single trade.

Plain and simple, these are basic risk management principals.

There is no standard amount of money to risk, just like there is no standard business. An acceptable businessman’s risk depends on the size of your trading account, and your trading method and pain and tolerance.

Emotional Trading

Trading is so exciting that it often makes stock traders feel high, and then suddenly very down.

Nobody can get high and make money at the same time. Emotional trading is the enemy of success. Fear and Greed are bound to destroy a stock trader.

A real professional stock trader does not get to excited or down about wins or losses

This is proper stock trading psychology.

The goal of a successful professional in any field is to reach his personal best. You need to concentrate on trading right. Each trade has to be handled like a surgical procedure – seriously, soberly, without sloppiness or shortcuts.

This is a stock trading risk management plan.

A loser cannot cut his losses quickly. When a trade starts going sour, he hopes and hangs on, and his loses pile up. And as soon as he gets out of a trade, the market comes roaring back.

Trends reverse when they do because most losers are alike. They act on their gut feeling instead of using their heads. The emotions of people are similar, regardless of their cultural background or educational levels.

Emotional traders go into risky gambles to avoid taking certain losses. It is human nature to take profits quickly and postpone taking losses.

Emotional trading destroys losers. Good money management and timing techniques will keep you out of the hole. Losing traders look for a “sure thing”, hang on to hope, and irrationally avoid accepting small losses.

Having a risk management plan is not an option if you want to succeed as a stock trader.

By: Dean Gust

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It is time to stop trying to keep up with the Jones’! There is no point in worrying yourself to death about having the newest or the best. Of course, the United States’ economy teaches us that consumer spending is the only way to survive. However, there are smart ways in which to do this.

How You Can Be More Frugal

Some of the things that you can do in order to be more frugal include:
Whenever you are buying a high-end item (i.e. cars, boats) that will depreciates in price as it ages, buy it used. Never lease a vehicle unless your employer is paying for it. Don’t be the first to buy the latest consumer electronic item to hit the market. Wait for the bugs to be worked out and the price to come down some too. Only buy the technological items that you need. Buy traditional styles of clothing. Buy clothes at the end of the season for next year. Buy gently used clothing form a resale shop. If you want to get in on a short-term fad, make sure to pay as little as possible for it. Don’t eat out so much. This will also make you healthier. Whenever eating out, bring half of your meal home for later. Look for sales, coupons and what’s in season whenever you go grocery shopping.An Attitude Adjustment

You may need to give yourself an attitude adjustment in order to be successful in your frugal ways. Some of the attitudes that you will need to develop include:
Don’t base your ego on the items you own. Spend money on items that will appreciate, not depreciate. Use your items longer. Save up the money you will need for a vacation before taking one. Watch for good sales whenever you are purchasing items. Never throw away those things that you can repair or recycle. Don’t treat shopping as a hobby.In Conclusion…

It may not always be easy to be so frugal. This is when you must keep your goal in sight. In the end, you will have more money by living in this fashion.

By: Darius Maslow

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This time in history marks a point where everyone has stopped and realized that the debt of this country has certainly gotten way out of control. People all over the country are losing their jobs, foreclosing on their homes and filing for bankruptcy. This type of a country will not stand long if these types of things continue to happen and more and more people fall into a completely black hole of debt. In order to prevent more of this from happening, there are a few things that people can do in order to keep themselves out of trouble and out of debt.

The number one problem with debt is that people are simply spending more than they make. Although this is certainly an unavoidable thing when you buy a home that costs well over 200 grand, it is important for the rest of the things in your life that you don’t spend more than you make. Credit cards seem like really great ideas because you can basically purchase anything you want and then just worry about it later. The problem is that sometimes later is not a good time to pay it off because you might lose your job. It is better to save up for something that you really want and then buy it straight across.

One of the most interesting parts about the Unites States is that you are basically required to get into debt if you want anything at all in this country. Your credit score which basically shows people that you are good at getting into debt and then paying it off, is used for just about anything and everything. Although you do need to have a proper credit score in order to get everything set up and running, it is important that you limit yourself to the amount of debt that you accumulate over time. Limit yourself to one or two credit cards and try to only use them when you know you can pay them off in full before the end of the month. Credit cards are fine when you have the money to pay them off in the near future. It is the terrible thing called interest rates that really gets people into trouble.

The important thing to keep in mind is to just be smart with your money. Debt consolidation is something very helpful for some people out there who are truly in a lot of financial trouble.

By: Billings Farnsworth

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Somewhere between ages 6 and 8, a new word may enter a child’s vocabulary; allowance. It is also at this age that a child should start to learn the value of a dollar, and the concepts of responsible spending and saving. Starting this education at a young age is key in raising a financially responsible young person. The amount of allowance is up to the parent, but it is recommended to match at least half of the child’s age. So, allow at least $4.00 a week for an 8 year-old. The child should be encouraged to spend their own money on certain luxuries, like candy, movie tickets, and collectibles. This way they can learn to control their spending to save up for something they really want, and also gain some independence. As a rule, they should save at least half of their weekly allowance.

Use a simple checkbook system for the child to keep track of his/her finances. It’s easier if there’s a predetermined time for giving allowance, or if payment is made immediately after a job is complete.

It’s also good to have a rewards program, but not to tie the reward to regular chores. Children should help around the house regardless of monetary compensation, but allow them to earn extra money for doing extra work. A child shouldn’t expect to be paid for taking out the trash and washing dishes. Also, money shouldn’t replace pride and affection as rewards for good behavior. There’s a fine line between reward and bribery. Remember to be a parent, not an employer.

When a child reaches the teenage years, it’s time to talk about the household finances and let them know where the family stands financially. By this time, the young man/woman should have an appreciation for the value of a dollar, and an understanding of working to achieve financial goals. He/she may soon be ready to get a job outside of the house. For teenagers, the more responsibility they have for themselves, the more responsible they will have to act. If they are expected to buy presents for friends and siblings, pay for their own gas, and contribute to college savings, then they’ll better learn to manage their money accordingly.

These are just a few lessons and values that need to be instilled in a child by the parents. Start financial education at home at a young age, and keep teaching through young adulthood.

By: Albie DiBenedetto

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