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9 Money Management Lessons
Started:March 6th, 2011 (12:02 PM) by imnewtrader Views / Replies:1,486 / 2
Last Reply:March 7th, 2011 (03:32 PM) Attachments:0

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9 Money Management Lessons

Old March 6th, 2011, 12:02 PM   #1 (permalink)
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9 Money Management Lessons

I've been reading all over the net, and I am recently reading articles about Money Management. This one caught my eye.I'll be sharing it with you all, coz for me, these lessons are effective!

1. No one is going to manage your money for you
I donít think that I ever really thought about money management until it was absolutely necessary. While I did pay the bills and learn some practical life skills in college, it wasnít until I got my first professional job that I was actually in charge of my own finances. No one (read: my parents) was looking over my shoulder telling me what I could and couldnít afford. I was in control of my financial destiny Ė for better or for worse.
2. Money doesnít grow on trees
Obviously, I knew that money didnít literally grow on trees, but I also didnít understand the value of a dollar. Growing up, whenever I needed money, I simply asked my parents for it. So I knew how to spend money, but didnít understand what it took to earn it. Iím now a big proponent of parents teaching their children about money management, even at an early age.
3. Education is essential when it comes to money
Itís unfortunate that financial management is not taught as a course in high school because it could really benefit a lot of young people. Many money mistakes are made early in life, including piling on credit card debt. Then, in your twenties, you have to figure out how to pay off your debt. Itís never too late to educate yourself about money, so look to financial experts such as Suze Orman and Dave Ramsey to learn how to manage what youíve got.
4. Budgets are key
Though I finally had autonomy over my own finances, I still lacked control. What I needed was a management system in order to know what was coming in and what was going out, as well as a way to make sure that I was not overspending. I created my own budget with the 5S System, and it has worked very well for me. Although there are ways to manage your money without using a budget, this system works well for many people.
5. It is possible to not use credit
Although it is not always convenient or desirable, itís possible to live without using credit cards. And when you figure out how to do it, a burden will be lifted off your shoulders and youíll gain financial freedom. You will also develop important life skills such as patience, hard work, and perseverance as you save up for what you need and want.
6. You must make the effort to shop around
I really dislike shopping, whether it is for clothes, groceries, or for gifts. I have a tendency to buy the first thing I see that fits my needs. ďGet in, get outĒ was my shopping philosophy until I learned that shopping around and utilizing discount coupons can really save me money. It takes time and effort, but pays off by helping me stick to my budget and not have to use credit.
7. Expect the unexpected
Life can be full of surprises, and Iím more at peace when Iím prepared for them. Over the years I have built up a good-sized emergency fund for when the unexpected comes. But the unexpected is not always a bad thing. Sometimes the unexpected comes as a bonus check, a raise at work, or even a forgotten $20 bill in a winter coat. In those instances, I either put the surprise to good use or simply enjoy extra money that I did not have budgeted!
8. Money doesnít solve problems
Every once in a while, I find myself thinking, ďIf only we had a little more money, then life wouldnít be so challenging.Ē But challenges can actually be a good thing. We as humans are designed to work and solve complex problems. We would be unfulfilled if we didnít have to work hard to earn lifeís rewards. Iím not saying that having more money wonít sometimes help a bad situation, but problems never just disappear because of money.
9. Itís better to give
Thereís a certain sense of satisfaction that goes along with leading a life of stewardship by giving of our time, talent, and treasure. I find that when I am less selfish, I am more at peace. Giving goes beyond just the monetary level, and you donít always need to do big things to make a big impact. Mother Teresa once said, ďIn this life we cannot do great things. We can only do small things with great love.Ē

Reference: Ľ 9 Money Management Lessons I Learned as a Young Adult

I really really find these 9 lessons worth reading!!!

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Old March 6th, 2011, 12:02 PM   #2 (permalink)
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Old March 7th, 2011, 03:32 PM   #3 (permalink)
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It is very difficult to reply to this post as it is not trading related.

Money management in trading relates to controlling risk and optimizing the bet size via methods such as fixed fractional position sizing. The statements above relate to general dealings with money, but have little to do with proper money management in the way it is used by traders.

It is just some general rules how to organize your personal dealings with money. Some of these rules can be adopted for traders.

-> 3. Education is essential
-> 4. Instead of a budget you should have fixed rules and a journal.
-> 5. It is possible to trade without leverage but that makes no sense. Leverage must be controlled as part of money management.
-> 7. Expect the unexpected. Pay attention to fat tails, that is low probability events

The other rules cannot be applied.

Last edited by Fat Tails; March 8th, 2011 at 06:14 AM.
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