Financial management is a key component of any organization ; from the biggest businesses in the world to a small household. We believe that it is necessary to organize and plan your earnings and spendings in order to have a clear view of your financial situation at any given moment. Besides, it is also the only way to work towards accomplishing your financial goals. Becoming wealthy isn’t magic, it is the result of mathematical deliberate decisions geared towards capital and assets accumulation. Financial management is also crucial in trading and this article, we’ll show you why!
Financial Education
If there’s one thing that’s lacking at school, it has to be financial education! I don’t know about your country, but everywhere I’ve been I have yet to see or hear any reports of kids learning about finances at school or high school. Even in college/university, this type of knowledge is still very uncommon and reserved to some very specialised courses. Whether you like it or not, our world is totally based on the financial system so it should one of the first thing that we should know right? Well, it isn’t like that and that’s one of the reason why a lot of people experience financial troubles in their lives.
Up to now, financial education was transmitted within the elite and wealthy of our world only. Since we can’t rely on the education system to teach us about it and we don’t all know Bill Gates, we have to do it ourselves! Thanks to the internet, we now have access to an unlimited amount of information online, most of the time for free, about financial education and financial management. This is a tremendous opportunity for anyone who wish to improve his financial life and grow his net worth. As we said earlier, your financial situation depends on your knowledge about finances and your actions. It is not a mysterious and inexplicable phenomenon but a ‘science’ in itself.
Financial education allows us to understand the fundamental concept of money and how we can direct its flow to achieve our goals. It teaches us about how to accumulate assets and multiple sources of income, limit liabilies and uncontrollable spendings in order to grow our wealth over time. We strongly recommend anyone interested in investing and trading to learn as much information as possible about finances before starting as it will definitely help you a great deal in your endeavors!
Trading With Financial Knowledge
As with everything that involves earning and spending, trading requires financial education and knowledge. You should know exactly how much funds you want to allocate to any of your investments with a margin for profit and safety. Trading especially involves significant risks and you should also only invest what you’re able to lose. Define a safe budget for yourself so that even if you would lose it all, your wealth won’t be that affected by it. This is why as a guideline, we don’t advice anyone to invest more than 5% to 10% of his net worth into trading.
Knowing this and also how much you want to allocate your trading budget to every trade will help you dramatically as it will give your boundaries to not go over. When you trade in a market like Forex for instance where $5 trillion are being exchanged on a daily basis, it is very easy to lose control as there are potentially an unlimited amount of money to be made. However, there’s also an unlimited amount of money to be lost and greed and fear will definitely push you to make rookie mistakes if you didn’t set a solid bugdet, plan and stick to it. Having financial education, management and discipline will give you a frame from which to trade safely and succesfully.