I’ve written about money management in the past, mainly using the term to refer to risking a set portion of your account on each position when trading so as to not blow too much of your account during difficult times in order to survive another day.
But in reality money management is more than this, it is needed in every crevice of our financial lives. We manage our money when we decide if we can afford some new shoes, we manage our money when we chose how much to invest in a certain asset class, we manage our money when we play blackjack, we manage our money when we are getting out of debt, we manage our money when we save for a deposit on a house, we manage our money when we decide how much to pay into our workplace pension, we manage our money when we take out an insurance policy for our life or for critical illness and we manage our money when we chose to buy our holiday on a cashback website. Without money management we would spend too much, we wouldn’t be able to plan for our future, we would risk too much on our investments, we wouldn’t take advantage of crafty deals and we would most likely have a very tricky retirement.
The problem I have is the term money management is so bloody boring. Even telling my wife that I was writing a post about money management caused her eyes to instantly glaze over. From now on i’m going to refer to money management as monagement to save me cringing every time I type the phrase.
So what monagement tools can we use in our day to day lives to ensure we succeed in our goals to amass money and to grow that money:
- Budget – use a budgeting app such as YNAB to make sure we know how much money we have coming in and how much is going out. This way we can make decisions on how much we can afford to spend, and how much we can save/invest.
- Optimise cashback – Take advantage of cashback websites, cashback bank accounts, cashback credit cards, reward cards and other reward schemes (such as vitality rewards (life or health insurance)).
- Trading drawdown risk – Use monagement calculators when trading to calculate how much to trade per point to ensure we don’t risk too much on each position. Remember if we risk too much per position and have several losing trades in a row, we risk blowing our entire account and cannot survive to benfit from future profitable trades. Check out my calculators on the calculators tab above.
- Diversify your money – Invest globally across multiple asset classes to take advantage of non correlation.
- Audit your pension – Check out how much your employer pays into your pension and make sure you are taking full advantage of the benefits. For example my employer will pay double my contribution up to 6% (so 12% for them).
- Audit your protection – Ensure you have suitable life, critical illness and possible out of work insurance to protect your family in the case of the worst happening.
These are the basic monagement techniques that will get you well on your way to saving more, investing more and growing your money faster than ever before. As ever please get in touch using the comments section, the contact page at www.tradecompoundgrow.com/contact or email me at email@example.com if you have any questions or comments and have a great week and weekend.