Jeffrey Greer asked:




We have all heard the phrase “money management” before, whether it is in advertisements or on financial education segments in the news. To be honest, many people are not even completely aware of their overall financial picture, much less their ability to acquire good skills.

Money management really does apply to everyone, from minimum wage workers to CEOs of billion dollar conglomerations. Know that effective management skills are applicable to every financial scenario imaginable. It really does not matter how much total money there is to manage; what matters are the basic guiding principles of how you handle that money that you do have.

When you are thinking about your personal financial management style, consider whether you really know what you have as opposed to your debt level. Developing a clear, reasonable budget is a must when planning your financial future. If that thought is scary to you, know that budgeting just takes some common sense; do not spend more than you make.

Speaking of what you owe, most, if not all, money management tips will refer to credit card debt and how to avoid it or at least get a handle on it. Know that this is something that can be a budget buster. A financial management expert knows that credit cards must be used wisely – to build a solid credit file – and never be abused.

Also, the best money management involves a system for savings. You need money right now, but never lose sight of the fact that you are most assuredly going to need some later, too. Good management skills involve this allowance for your financial future. You do not have to save your entire paycheck, but you should be saving at least a little something out of each check.

These skills are therefore an integral component of financial comfort. Be well aware of how much money comes in versus how much you have going out. Achieving financial management and making it a success is going to involve a lot, but never lose sight of your very important goal.

Jorge

Ilana Diallo asked:




There were so many families that were affected by the recent financial crisis in this country. This financial crisis has motivated people to take a much closer look at how they spend, save, and what type of investments they have.

Saving money isn’t something new but as the “microwave” generation came forth, there has been more emphasis on impulsive spending. The mentality of getting it now has somewhat corrupted the nation. The younger generation of children that are in school now have very little understanding on the basics of money.

Because of the levels of interest rising, there has been more businesses and educational advocated that have began teaching financial literacy to children and adults alike.

Money Management Profiles

Being able to manage money more efficiently starts with a clear understanding of how money is spent and who is doing the spending. There a three basic types of money managers. There are the spenders, savers, and investors. Each of these profiles are described below:

Spenders
This person doesn’t plan for the future by saving. Some individuals in this category may think about planning for the future but still use all their extra money splurging on items that they want in excess. So this type of person may earn enough to save but doesn’t. They make choices to upgrade their cell phone plan or buy several pairs of shoes, go to the movies every weekend, buy school lunch every day, or spend all their extra cash at the arcade.

Savers
This person saves their money on a regular basis. This isn’t a bad strategy if it is coupled with a method that creates multiple streams of income that is residual. The savings is good because it takes care of those unexpected expenses and the emergent financial crisis.

Investors
This person puts their money where it can create residual income over a lifetime. This person does save and will spend but saves for purposes and spends to invest in something with a large return. Some investors place their money in the stock market, which is a riskier type of investment and doesn’t always present a residual income potential. Creating residual income is the best investment that anyone can make. This type of investment establishes a more secure financial outlook.

Family Money Patterns

Different family patterns have always been recognized. So why not family money patterns and spending habits? These patterns can affect individuals in two different ways. Some will look at their family money patterns and say they will not follow in that same pattern and others will naturally gravitate towards the pattern.

Families tend pass on different legacies to their children. There is nothing greater than passing on great money management skills. When creating generational habits it can become generational wealth. It starts by some sort of investment and leaving behind a legacy of spending, saving, or investing.

Rhonda

Catherine Heridis asked:




Financial education is a subject that has been denied for most people. Most Americans lack some form of financial education. It is not surprising since money management skills were not taught in schools. A foundation to management and wealth strategies are essential to meeting your life’s needs and future retirement.

Financial education consists of management skills, wealth creation strategies and a ‘wake up’ call to a person’s financial reality. Having a 6- month emergency fund, getting out of debt, saving money for retirement is the name of the game of life. This means less worries, less arguments with significant other, and peace of mind for not only the present but for the future.

Fortunately, money management skills can be taught. Financial education and money management seminars and classes are beginning to appear and become available to the masses. Some public schools are offering classes on money management and/or financial planning to students of impressionable age.

With today’s lackluster economy with many people losing their jobs, the stock market plummeting and real estate market going downhill, now it is the perfect time to learn how to get your finances in order and learn money management skills. Take the initiative to find the best investment vehicles for yourself and not rely solely on so-called experts and others who may not even be qualified to give out financial advice. Learn to save wisely. Seek out competent financial advisors to assist you with your financial planning.

It is never too late to take action. Management skills can be taught and learned. By obtaining the proper financial education, money worries and related stress may be alleviated. Take proper action and look forward to a brighter and more secure future.

Robin

Lucas Richardson asked:




Forex money management is often talked about but equally often ignored by a lot of traders – names like Nick Leeson and Jerome Kerviel spring to mind as traders who risked rather more money than was sensible. But what can you do to ensure that your own money management is sensible whilst still allowing you to grow your bank at a pace that is quick enough to keep you interested in trading?

Don’t risk too much per trade

Regardless of the results of your paper trading, placing real money on real trades is a completely different feeling. It’s one thing to paper trade at 2% or even more of your bank but those figures are only play money and deep down you know that’s true. If you blow up your bank on a demo Forex account, no worries, you can re-start. But if you do the same thing in real life, it’s a different story. If this is your first time trading currencies, start with a really low risk per trade – maybe as low as 1/2% of your bank – until you get into the mind set of trading cold, hard cash.

Set your stop losses sensibly

One thing you’ll soon learn when you’re using a full Forex account is that stop losses aren’t a guarantee that your trade will actually exit at that point. Sometimes the market is moving too fast and flies past your stop loss without a care for your position. This is called slippage and it happens every now and then, quite often when there is a big news item but sometimes for other inexplicable reasons. That said, you still need to set your stop loss – use a spreadsheet or calculator to decide how many pips away from your initial position, taking into account the size of the spread and the regular fluctuations in the market prices. Setting a stop loss is an art form: set your loss too tight and you run the risk of being pipped out of your trade; set it too slack and you run the risk of eating up your bank when a trade goes the opposite direction to the one you thought.

Ride your winners

Too often, traders ride their losers and cling onto trades in the hope that they will turn round. Many people also cut their winners far too quickly. It’s tempting to scalp some pips but unless scalping the market is your chosen trading style then you should resist the temptation to exit a trade too early. Sure, move your stop loss to break even when it’s safe to do that but don’t close out a whole trade too early. Most software platforms allow you to set a trailing stop loss which will help to lock in your trades whilst protecting most of your gains. Take the time to learn how to set these up in your software and watch their effect on your bank. Like most things in life, this is a skill that takes time to learn but your patience will be rewarded as your bank begins to grow.

Anita

Connie Barker asked:




Whether you are in a deep financial hole or would like to get the most out of your money there are some things that you should know to accomplish these goals. Money management can help educate you on the inner workings of money, help you avoid the many financial pitfalls that exist and show you how to make money work hard for you. If you would like to get out of a difficult financial situation and achieve financial serenity, here are some money management tips that are extremely helpful.

In order to truly succeed, you must first understand how money works. This includes learning how to create a budget, save, how to be responsible with credit and how to choose lending products that fit your means and lifestyle.

Create a Budget

Creating a budget can help one understand their unique financial situation. It is extremely easy to create a budget. On one side of the paper, put all of your revenue including your income from your job, and any money you receive from investment, etc. On the other side of the paper list your expenses. Expenses include your mortgage, your car payment, gas, tolls, daily coffee, everything you can think of. If your income exceeds your expenses then you are in a good position to save your extra earnings. If your expenses exceed your income then you are in big trouble and you must cut back your expenses to cover your spending.

Savings

In order to manage your money, you should start building a savings. It is important to pay yourself first once you cash your check. Whether it is $20 per week or $200 per week make sure you save something each month. This savings can be helped later on to invest and make your money work for you.

Be Responsible with Credit Cards

Credit cards are not free money, they are unsecured loans and they can wreak havoc on irresponsible spenders. Many people fall deep in debt by spending carelessly with credit cards. Credit cards should only be used in an emergency or when you have the money to cover your purchase. Credit cards are not as convenient as most people think. In fact, if you pay the minimum payment the credit card company asks of you each month, you may find that an item that cost you $100 really cost over $200 by the time your credit card debt was paid off.

Choose Loans Wisely

Most people require a mortgage or car loan to purchase high priced items. While these lending products have helped millions it is important to choose the right ones that fit your means and lifestyle or else you may find yourself in financial difficulty. Before taking out a loan, do some research and educate yourself on the many types of loans available. Make sure the loan you choose has low risk. For instance, while banks may try to sell you products such as Adjustable Rate Mortgages or Interest Only Mortgages, you may want to stick with the Fixed Rate Mortgage. At least with this mortgage the interest rate will never change and you will know how much each month’s payment will be for the life of the mortgage.

Judy

Jonathon Campbell asked:




Lately financial strain seems to be present on a daily basis in our lives because beyond the financial crisis hitting the world, more and more people are spending more than they earn via their credit cards and other credit instruments.

While lenders are confident that people with good credit scores will pay off their debts in a timely manner, inadequate management of our money makes us lose track on how much we are earning, how much we owe, how much we need to cover our daily needs and how much money we can allocate to repay our debt.

We are becoming indulgent with our spending in a time when we need to retake control over our money and here is where money management software can help us to create a budget and generate pointers to manage more efficiently and to stop falling into an avalanche of liabilities while retaining expenses under control.

Budgeting is easy, but may people are so scared of the simple word associating money management and budgets with accountants or financial advisors. You do not really need to hire a professional to help you organize your expenses, but you can always invest in a good money management software package to help with basic household financial activity.

Money management software facilitates the creation of reports, graphics, and listing results of a planned budget that can be easily modified and re-adjusted to reflect your real financial situation and preparing you to pay off your debt while implementing money-saving strategies.

This type of software helps you to track household expenses and create some money projections of future income versus outgoings, assisting you with your expenditures so you can accurately track where your money comes from and where it goes.

Spending and earning money seem to be activities so natural that some people believe time dedicated to track your money is waste of time. Nonetheless, understanding cash flow is the best way to avoid fall into the trap of using your credit card to supplement your income.

A budget serves like a guide to give you control over your finances and avoid overspending. Taking advantage of the capability of a money management application to generate it will mean easier record keeping, projections and allocate money to cover your needs.

Keeping control over your expenditures and money will not keep control over you, keeping in mind that a good money management software package will also provide you with useful personal finance information that will contribute to make wiser money decisions in almost any aspect of your every day life.

Pamela

Marvin Evans asked:




There are a lot of Systems out there and they all have there moments. Most of the information you read from the creator of that system show fantastic results and making huge amounts with very little money in the account. Sound familiar. What they are not telling you is that they are showing you the worst way to trade, OVER LEVERAGING YOUR ACCOUNT. This is why we developed the PIP Calculator. This will give you guidelines to follow when trading.

Most beginning traders believe that a good entry into the market is the key to success.
Unfortunately most are very wrong. Money Management is by far the most important criteria of
trading, Every successful trader will agree that managing your trades correctly is the most crucial element to consistently increasing your bottom line. Not to mention managing your money correctly, by limiting your risk to 2% to 10% of your account balance, at any given moment, in open positions, which will reflect your lots or trade positions.

Losing a trade or several trades in a row is just part of trading, get use to it. Unfortunately, markets move in unpredictable ways at times and even the best programs, even the ones I have reviewed, are not always right. In fact, most professional money managers trade with systems that are right only 50% of the time. How can they make the huge returns they claim if they are only profitable 50% of the time? Money Management!

If you’re able to effectively manage your money you only need to be right about 50% of the time. The unfortunate thing about 95% of the current traders is that there primary focus tends to always be on making money and not protecting their account balance or profits. This is where the Money Management PIP Calculator helps with this problem.

Let’s assume for each $1000 we use to control a position that we are only willing to loose $100.00. Now we will also assume that for every trade you enter you expect to make at least twice what you’re willing to loose. In the event your position goes your way, you would set a limit order for $200.00 and we will assume you have made a totaL of 10 trades, 5 winners and 5 losers. 5 Losses would be -$500 and 5 wins would be $1000. You have just increased your account by $500 and you are only right half the time.
The 7 Rules of good Money Management.

DO NOT ENTER ANY TRADE WITHOUT A STOP LOSS. Always trade with a Risk Reward Ratio of 1 1/2 to 1 or better on every trade Never over leverage your account. True. Over risking will leave you with nothing for the next trade. Make realistic goals that can be achieved within reason. Take what the market gives you. Losses are part of Trading. move on to the next trade, and trust your system Take profits off the table in every trade. Only trade with money you can afford to loose. This will help your emotions in trading.

PIP Calculator comes with mouse over information to give you guide lines on how much to enter on a trade with most Currency pairs. It is set to work with all currency pairs. Click Money Management PIP Calculator for the calculator.

Troy

Michael Russell asked:




In this article we’re going to cover the art of money management as it applies to gambling.

Money management is important in all walks of life, where any type of investing or spending is involved. Because of the risks involved in gambling, especially in casino gambling, money management is more important than even knowledge of the game itself. Unfortunately, most novice gamblers don’t understand how important this is or even that they should do it. Hopefully, this article will help the novice gambler understand how to better manage their funds when hitting the casinos.

So what exactly is money management? Well, it’s what it sounds like. It’s managing your money in such a way while at the gaming tables so that you minimize the possibility of loss. This is in direct opposition to those who go to the gaming tables for the sole purpose of winning as much money as they can, money management be damned.

Okay, so how is this money management accomplished? It starts with understanding the odds of the game you are playing.

Let’s take the game of roulette. A roulette wheel consists of 38 numbers; 18 black, 18 red and 2 green. Trying to gain the best chance of winning at this game you want the odds to be as close to your favor as possible. In this case betting either red or black or for that matter odd or even will give you the best odds. What exactly are those odds? By dividing 18 black, red, odd, or even numbers (they’re all the same) by the total numbers on the wheel, which are 38, you get a percentage of 47.36%. Those are your chances of winning on any one spin of the wheel.

So what does this have to do with money management? Everything.

For every 100 spins of the wheel, on average, you are only going to win 47 of those spins. So if you were to bet, say, $10 on each spin of the wheel eventually you would be on the minus side. Why? Because you would win 47 times for a profit of $470 and lost 53 times for a loss of $530. Adding those numbers together you come up with a net loss of $60. So in this case you did not manage your money properly given the odds of the game.

So then the question becomes, how DO you manage your money even though in the long run you are going to lose more than you are going to win?

By realizing that after a win you are most likely going to have a loss. Therefore, after the win, betting $10, you want to bet less than $10 on your next wheel spin. That can be anywhere from $9 down to the table minimum, which in most cases will be about $5.

Let’s take a look at what happens now. Let’s say after each $10 win we drop down to $5 and then we lose the next spin. If this pattern continues for 100 spins taking into consideration that will are going to have 3 wins less than the 50 we would like since it’s not exactly 50-50, we come away with a profit of about $225. Quite a big difference from the $60 loss we experienced betting $10 on each spin. By managing our money we took the same odds with the same number of wins and losses and turned a negative into a positive.

That is money management as it applies to gambling. Take the same principal, figure out the odds for the game and that will determine how much to bet for each spin, roll, or deal at the table.

Janet

Winna Anastasia asked:




Many of you are simply not aware of how tricky money management could be. Contrary to what people believe, it is not an easy task. It requires a lot of planning and knowledge and the most significant part is implementing the whole process.

In life, or in trades, especially the stock and the currency trades, money management is required. People usually lose the simple plot of it techniques while indulging in trades and the consequences is hazardous.

The most significant aspect of trades is the money losing streak. Every trade would lead you to lose at some point of time. It’s important to know that you can’t avoid losing streaks.

The law of trade has it that losses are bound to occur. You can’t go on wining trades all your life, but the plot is how to minimize your losses. When the going is good you take advantage of better times, and maximize your profits by some sharp and imaginative trades, but then, when the losing streak starts, lower your risk appetite, and invest in low risk trades.

That’s what money management is. Even poker players, especially the professionally ones are well conversed with the rules of money management tricks.

It all boils down to how good a trading system is. Whether your chosen trading system is 60%, 70% or 80% profitable, the trick is to maintain your winnings close to a certain percentage, only then you would be able to survive the losing streak. It is also significant to understand how well you cope with it mentally.

If you are not mentally stronger, you won’t be able to withstand losses. The first step, therefore in a money management process is to understand the trade, and learn to cope with it mentally.

Then apply the money management techniques.

Gordon

David Jenyns asked:




Two well known traders discuss trading money management and how to pick stocks with the potential to do well in a bull market.

David: We have quite a good understanding of money management and the rules. What happens when you try and apply those money management rules to leveraged products? A big question is, we’re talking about what our maximum risk is, for example the number two percent is commonly thrown around. When you’re trading leveraged instruments, what are your thoughts on how do you calculate what your float size is? Do you look at what you are actually trading or would you look at the leveraged value of what you’re trading?

Stuart: I personally think you need to look at what you’re exposed to. You could walk in and say I’ve only got $5,000 here, so I’ll just deal with that. No, when you start trading with perhaps ten to one leverage, you’re not exposed to $5,000, you’re exposed to $50,000 and that’s how the market will deal with your situation.

We talk about double-edged swords, and that’s what leverage is. It provides fantastic opportunity and potential, but you cannot take that and ignore the other side. And the other side is the increased risk you’re taking.

I personally believe you have to deal with the leverage, the total, the larger of the two because that’s ultimately what your exposure is.

David: Perfect. A lot of new traders are attracted by only one edge of the sword. They’re attracted by the idea of that potential huge gain but there’s also that potential for a huge loss. So really you need to understand trading money management, start with those unleveraged instruments first, and prove yourself there before moving on.

The next question is how to pick a range of stocks with potential in a bull market and then the process of trading call and put options.

Stuart: I look for things that are already established in uptrends, and don’t mind buying things in highs. An alternative to that is seeing a stock trading in a range, just moving sideways over an extended period of time maybe over months. It may be moving in a narrow trading range, bouncing back and forth, not going anywhere, just going sideways and then heading for a break high from that maybe for a few weeks. So it’s clear from that the trading range, or consolidation range and then maintain that break.

A lot of people look at that for an opportunity and I think that’s technically quite sound. Personally I look for the ones that have already proved themselves and demonstrated their capacity to move higher and perhaps broken from that trading range, and the longer that trading range the longer the potential upmove when it does break.

About options, they are a leveraged product and they can bite should you not know what you are doing. With CFDs versus options, options have so many more factors to consider, so there’s so much more to learn.

Probably the biggest one that people aren’t aware of is time decay and how that can impact on the price of the option. But there are all these other things, how volatility the underlying security affects the price and the huge pricing model they use for options. Options can be quite a complicated thing to trade. They provide a great deal of flexibility, allow you to trade both directions but they are not easy.

Like any leverage, do the basics, do the homework, prove yourself doing the stocks. They’re the easiest. Do that for a period of time and then move on to something else. An understanding of trading money management should underpin all of this.

Brittany