Personal Finance: Complete Guide for Managing Your Money

Personal Finance: Complete Guide for Managing Your Money

If you want to learn more about managing your money, take a look at this guide on personal finance that we’ve prepared for you. Being able to work as a day trader is for many a dream. But it’s not necessarily an easy path to choose and it will require a lot from those who dare venture into the world of online trading. […] You won’t run out of money in retirement with lifetime income. But it’s not quite as amazing as it sounds.

If you want to learn more about personal finance, take a look at this guide that we’ve prepared for you.

Knowing how to administrate and manage your money wisely is always a good idea. From the smallest area to the largest, well-managed resources are essential aspects of your life. The more information you have about personal finance, the better prepared you are for different situations.

The behavior of money is an essential aspect of the economy, relevant to the management of resources. Finance is a branch of economics responsible for studying money management. Understanding this matter will help you to make intelligent decisions regarding financial resources.

Through time, this area of ​​the economy developed resources and tools to address monetary decisions to bring benefits – both in individual matters such as what goods to buy – to even state affairs, like project financing.

Among the aspects that finance takes into account, the following stand out:

  • Investment profitability
  • Debt management
  • Control of loss of money due to inflation,
  • Assessing the risks of tangible and intangible assets.

In this sense, personal finance is the use of those principles to manage your resources.

Personal finance deals with how individuals or families manage their resources throughout their lives. Besides income and expenses, it includes the financial tools you dispose of to optimize your money management.

What are the types of personal finances? The main objective of personal finance is to help individuals make informed decisions and optimize resource management contemplates being able to achieve a series of sub-objectives, among which are:

  • Income
  • Control of expenses
  • Investments
  • Savings

These elements correspond to how we relate to our environment through money – with the management and administration of incomes, expenses, planning, savings, and investing over time – considering financial risks and future events in your life.

You can understand income as all the profits added to your budget. Thus, income is both monetary and non-monetary elements that accumulate and consequently generate a consumption-profit circle. Generally, it appears in gross figures – without deductions – and become net when you pay your taxes.

Financial expenses are all those that derive from obtaining financing or ownership of any financial liability. They affect both companies and individuals.

One of the most common financial expenses is the interest rate paid on debts – which allows the lender to make a profit, expressed as a percentage, based on the current amount the lender gave to the borrower. Interest rates can vary depending on the type of financing chosen and the creditworthiness of the borrower.

Investing is a challenging part of personal finance. Investments are risky, so before we start, never stake capital you can’t afford to lose.

Investments consist of staking part of your capital in stocks, commodities, or similar, to profit in the long run. In economics, we identify resources as associated costs. The primary resources are land, time, labor, and capital. Everything that needs the use of any of these four resources to obtain a profit is an investment.

When you invest, you assume an opportunity cost by renouncing those resources in the present to achieve future benefits. But these benefits are uncertain, meaning there is a risk. It is necessary to have had an income previously saved part of this income to invest in.

You can make different types of investments. There is no single classification that is better than another – there are several, all valid and useful depending on your situation. The economic meaning of investment, whatever its type, is governed by four fundamental factors: performance, risk, liquidity, and term.

  • Performance (Return): The return is what we get in exchange for investing. It is usually measured in terms of profit or profitability, although it does not have to be that way.
  • Risk: Refers to uncertainty. Nothing in economics is 100% certain. We must always work with assumable risk in case the investment turns the other way around.
  • Liquidity: The ability to convert an investment into money with minimal losses.
  • Time: this is the third fundamental variable. We can expect a return but depending on the time it takes to obtain it, will it compensate for the investment?

Paying attention to these four factors, although it may seem obvious, is not so common. Many investors tend to focus only on the first factor – how much will I earn? You must pay close attention to the first two as well, especially risk.

Knowing if an investment is better than another is difficult. In essence, it will depend on the preferences of each investor. Some will consider that profitability of 50% is good while others will settle for 10%. Moreover, take into account your aversion to risk and your patience.

Saving is the portion of the income you don’t consume. You reserve that capital out of any risk to cover a future need or contingency. You can even leave it as an inheritance. In essence, saving is the percentage of income that the person does not spend or invest in.

In many cases, it is necessary to seek a financial advisor as saving is an essential element of a family, but it is only achievable through good planning.

But people tend to confuse saving and investing. We call savings the money that we keep to dispose of it in the future. We give up spending it in the present, putting it in a safe and risk-free place that generates interest. You save when you keep your money in cash, when you keep it in a bank account, or a deposit, for example.

On the other hand, we call investment the money you don’t spend, but you use it to bring you extra money in the future. We associate investing with the purchase of goods or financial assets, hoping to make a profit. This extra profit is associated with risking your money in exchange for compensation. You can invest your money in several things, from something immaterial, like education, to financial assets, like stocks, bonds, or mutual funds.

Planning personal finances and setting short and long-term goals requires an analysis process that has several stages:

  • Evaluation: Know your current situation. What kind of income do you have? What is its level? What are your expectations for future changes?
  • Set goals: Identify and prioritize short and long-term financial goals, such as monthly purchases, buying a house, saving for retirement, etc. For instance, if you’re planning to invest, keep in mind the timelines associated with them: short-term investments last less than a year – medium-term between 1 to 3 years, and long-term last more than three years.
  • Planning: Define a strategy about how you can achieve your objectives and what are the appropriate financial instruments for it.
  • Execution: Carry out the financial plan considering adjustments in case of sudden events.
  • Monitoring and reassessment: Monitor compliance with the plan, verify if there are relevant changes in the initial conditions, and evaluate if an adjustment or change in the financial plan is necessary.

Another essential aspect is analyzing your financial tools. Individuals and families have a wide variety of financial instruments that help them to manage their resources, which are:

  • Banking: Check your bank accounts, savings accounts, consumer loans, credit cards, debit cards, etc.
  • Investment: Stocks, mutual funds, bonds, etc.
  • Insurance: Life, accident, health insurance, savings insurance, etc.

The choice of each type of instrument depends on your situation and your preferences. To set short, medium, and long-term goals, it is essential to monitor financial obligations and allocate a percentage of resources to a savings fund.

Let’s face it, most people don’t plan their budgets. But to set short, medium, and long-term goals, you have to make one. There are digital tools you can use like apps, or an Excel document for your budget, which is the preferred tool for most people. No matter which option you choose, make sure it fits your lifestyle.

Here’s an example of a budget:

Photo: culturopedia

Likewise, you need to update your budget each week to ensure you’re not spending more than you earn and that you save for your financial goals.

If you have balances on multiple cards, be sure to always pay at least the minimum on each – then pay off the balance in full, one card at a time. You should focus first on high-rate debt if your high rates in your credit cars are overwhelming you.

Focus on paying one debt at a time and consider paying your credit card with the highest interest first. Review the interest rate section of your statements to see which credit card charges the highest interest rate, and focus on paying that debt first.

If you decide to consolidate, keep in mind that it is essential to control your expenses to avoid accumulating new debt. Consolidating your debt allows you to combine several high-interest balances into one with a lower rate, so you can pay off your debt faster without increasing the amounts of payments.

Here are two common ways to consolidate debt:

  • Take advantage of a low-interest rate balance transfer to move your debt off high-interest rate cards. Keep in mind that balance transfer fees are often 3 to 5 percent, but the savings from a lower interest rate are often greater than the balance transfer fee. Always include that factor when considering this option.
  • If you have equity in your home, you may be able to use it to pay off card debt. A home equity line of credit can offer you a lower interest rate than what your cards charge. Keep in mind that closing costs often apply, but an added benefit is that interest payments on home equity loans are tax-deductible.

Adjust your budget priorities and start by classifying your monthly expenses like food, transportation, housing, and entertainment. Your credit card statement can be a useful tool. Many card issuers separate them by category. Look for areas that you can narrow down – then take the available money you have and apply it to pay your debt.

Saving for your retirement is not complicated if you manage your finance correctly. Investments are essential at this point, and long term investments can give good saving funds for your retirement.

Start planning your retirement with your savings and investments. You can consider saving 20% of your monthly income for your retirement plan. Consider this: if you let the years go by, the more money you have to save for a better retirement. Someone in his 20s saves 10% of income, while a person who starts at 30 must save 20%.

Saving in a Roth IRA is a good option as well. The IRA – Individual Investment Arrangement – is a retirement account that allows you to choose where do you want your money invested. One key benefit of these accounts is they help you save money on taxes for your retirement. There’s a time difference for tax breaks between Roth and Traditional IRA accounts, but you can pick whichever you prefer.

The money involved and the ways to finance expenses can be overwhelming if you’re preparing for college. Even if you qualify for a scholarship with awarded money, you should evaluate your student loans to cover the gaps in costs.

Paying your student loan while you’re still in college can reduce the overall outstanding debt you will have after graduation. Any private or unsubsidized federal loan can raise interest while your child continues in college. So it can be beneficial to pay at least the interest while the loans are deferred so that they don’t add up to the full amount. Also, you need to understand all the terms of the loan – and pay particular attention to due dates, how payments are applied, and whether additional costs or fees are charged.

You must repay everything you borrow with interest, so borrow what you need. Your loans come with interest and fees, even if you don’t finish college or get a job afterward. Students need to have a debt cancellation plan before graduation. Credit history will have a positive impact on your credit score if you make payments on due time.

Managing money is not a difficult task. However, some people have difficulties optimizing their resources according to the different obligations and responsibilities they have at home, like basic needs, payment of services, income, and other expenses.

You must learn to manage your personal finance responsibly, making way for independence and using your decision-making capacity correctly.


Working as a day trader

Working as a day trader

But what exactly is needed to start day trading professionally and how does an average day look for a day trader?

In the following post, we’ll try to answer that and much more.

As defined by the professional day traders over at, a day trader is a person that traders daily, often opening and closing several positions during a day, rarely keeping a single position open for more than a few hours at the time.

Naturally, to be considered a professional day trader, you will have to become efficient enough to make daily returns on your trades.

Now, there are several different ways one can work as a day trader and it’s all based around the instruments or assets that you choose to trade. The two most popular day trading options are to trade either stocks or forex (currency exchange). However, you can also trade commodities, cryptocurrencies, options, bonds, and much more.

With that said, many opt to trade several different assets and can, for example, combine forex trading with cryptocurrencies or stocks with commodities. This is best done using speculative derivatives such as Contract for Differences (CFDs) instead of trading the actual securities of the exchanges.

To become a professional day trader, one has to master a large set of different skills. Maybe it goes without saying, but the most important skill is learning how to analyze assets in search of value on a said market. Although, that is only one part of the equation.

  • Analytics – As mentioned, learning how to analyze financial markets is the key to becoming successful as a day trader.
  • Determination – You need to be determined that you will succeed. Learning how to trade is not easy and it will require a lot of dedication, often for many years on end.
  • Global Awareness – Without understanding what, how, and why certain things happen in the world, you won’t be able to analyze markets correctly. Having a good global awareness is therefore important.
  • Patience – Some days there might not be so many profitable opportunities and at times you’ll be losing more money than you make. The trick is to never give up and to continue grinding.
  • Research Skills – As soon as you start trading, you’ll realize that it requires a lot of research. Not only do you have to research markets and assets but also the tools you use, the strategies that you can apply, etc.
  • Mathematics – Day trading is a mathematical game and if you don’t have a good sense of numbers of calculations, you won’t make it very far.
  • Money Management – Perhaps the most important skill to master quickly is money management. You need a stable strategy for how much you’re going to spend and on what as well as knowledge about how to avoid or limit certain risks.
  • Trading Station – Professional day traders rely on a great trading station to aid them in their work. A good computer and at least two screens where you can show multiple graphs at once is the minimum. Many traders also use mobile trading platforms to further optimize their ability.
  • Trading Platform – The above-mentioned trading station will not be of any use unless you also have a trading platform where you make all your trades. These platforms are, generally speaking, provided by brokers.
  • Analytic Tools – In addition to analytic tools provided by a trading platform, most day traders rely on a plethora of other analytic tools that helped them better analyze markets to find potential trades.
  • As a day trader, you will mainly be working on your own and most often, day trader work from home. Therefore, you will have the ability to control your own working hours after your own needs.

    The only thing that you have to adjust to are trading hours. You see, every market and exchange are only open during certain hours. For example, if you want to trade American stocks, you will be working during American business hours, and if you prefer training Asian commodities, you will have to adjust to Asian working hours.

    The best part about being a professional day trader is that there is no cap on the potential income. Many day traders make several million dollars a month and on a lucky day, you might even make that in just one day.

    The more realistic goal, however, is to start making enough that you can live on the income. From there, you can streamline your skills and strategies to improve your returns.

    How you’re going to learn how to trade depends on the skills you already have and how fast of a learner you are. As a complete beginner, we would suggest that you start studying simple strategies and a few different markets. You can even open a demo account with an online broker to start trading using virtual money.

    Just keep in mind that there will always be new skills to master, new strategies to try out, and new markets to work with. In fact, you’re learning curve will never be completed. Even the most experienced traders are continuously working on improving their skills.


    Will a lifetime income option in your 401(k) solve your retirement woes?

    Will a lifetime income option in your 401(k) solve your retirement woes?

    Half of Americans who aren’t yet collecting Social Security are worried about outliving their savings, according to a recent study from SimplyWise. If you share that worry, you might be thrilled to hear that more employers are showing interest in providing annuity-based lifetime income options within their 401(k)s. This would allow you to convert your 401(k) savings into a stream of retirement income that will last as long as you do.

    A nonstop source of income might sound like the answer to all of your retirement woes. But don’t start celebrating just yet. Annuities, like anything else, have their advantages and disadvantages. Here’s a look at the pros and cons and how they could add to – or subtract from – your retirement savings efforts.

    The most appealing aspect of a lifetime annuity is that your money won’t run out. Like Social Security, the annuity continues to pay out the agreed-upon amount for the rest of your life. You won’t have to worry about outliving your savings or having a long-term distribution strategy. The money just keeps coming until you don’t need it anymore.

    An annuity is a contract between you and an insurance company. The process of converting your 401(k) funds into lifetime income is a sales transaction. You pay a certain amount either at once or in payments, and you receive the retirement income in return. Once you enter into that agreement, you generally don’t have the option to change the income payments or periodically take a higher distribution. That can be a good thing, since you wouldn’t be able to splurge on unnecessary purchases.

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    The fixed nature of an annuity can also be a bad thing, however. For example, you wouldn’t have access to extra funds in an emergency. You’d have to cover unexpected medical or home repair bills in some other way, maybe with cash savings or a credit card. That’s a strong argument for having ample cash on hand outside of your 401(k) annuity. As well, your annuity income has to allow for continued emergency fund deposits. If you spend your cash stores on something, you need the income capacity to replenish those funds.

    There’s also the issue of inflation to consider. If you’re living on $50,000 a year today, for example, a 2% inflation rate would increase your living expenses to $90,000 in 30 years. You can address this by selecting an annuity that adjusts your income according to the inflation rate. There is a cost associated with that feature, which translates to lower initial income payments for you.

    Your annuity provider has to make some assumptions about your life span to calculate your monthly income payments. Those assumptions are based on life span averages for other people with similar backgrounds.

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    Outliving those averages works in your favor because it increases the total value you receive from your annuity. But a shorter-than-average life span works against you. It’s possible that you’d convert your $500,000 in savings into an annuity, for example, and only receive $50,000 back in income before you die.

    Had you kept the money as savings without converting it to income, the unused $450,000 should go to the beneficiary named on your account. But with an annuity, that might not happen. Depending on the rules of your annuity contract, the payments might end with you, or they could continue to be distributed to your spouse.

    Annuities have a reputation for being expensive. A lifetime annuity normally has administrative fees, plus a premium to cover the risk that you might live well longer than expected. Generally, these fees will be higher than what you’d absorb if you owned mutual funds.

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    The result is that an annuity typically won’t produce the same level of returns as your invested funds. You’d have to consider that a trade-off you make in return for the security of lifetime income.

    An annuity offers peace of mind that you’ll have money coming in for the rest of your life. But that peace of mind comes with its own risks. You could die early and get shortchanged. You could realize later that your annuity income isn’t enough to pay your bills. Or you could dilute the power of your savings with excessive fees.

    It’s also worth noting that a lifetime income option doesn’t relieve you of the responsibility of saving. Quite the opposite; the annuity income available to you will be based on what you’ve saved. If you don’t save much, you’ll have access to a guaranteed stream of income that isn’t enough to pay your bills – which doesn’t sound like a good retirement solution at all.

    Keep your options open by staying focused on contributing as much as you can to your 401(k). That’s the surest way to solve your retirement woes, whether or not an annuity becomes part of your strategy.

    The Motley Fool has a disclosure policy.

    The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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    Personal Finance: Complete Guide for Managing Your Money

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