22 Aug
Saving

The Importance of an Emergency Savings Account

The future is highly unpredictable, making it quite a challenge to plan your finances.  Financial security can be fleeting, especially with all the demands that are placed on ones finances nowadays. With an emergency fund in place, you allow yourself some peace of mind so that you are not caught off guard in the event that you have an unexpected expense.

If you have planned everything¬† in your finances well, you may be wondering what the emergency fund could be used for. Here are some scenarios that could come up: –

  • You need to fix a broken light on your car
  • Visiting the dentist when you get a sudden toothache
  • Replacing damaged clothes and shoes
  • Fixing breakages and so on.

When you consider these emergencies, you begin to realise that your emergency savings account does not have to be one that needs to be filled with hundreds of thousands of dollars. The temptation to dip into this account would be too much. Rather, you should maintain it at a maximum of around five thousand dollars to help you easily deal with things that occur out of plan.

However, there is another type of emergency fund that you can aim to achieve, especially if you are working in a poor economic environment. This is one where you put aside at least half a years earnings to carry you forward in the event that you receive a pink slip and lose your job. This type of emergency fund will help you pay your bills and maintain your lifestyle as you look to find some other sources of income.

 

What is the alternative?

To truly understand the importance of an emergency savings account, consider what your options would be if you did not have one. To begin with, you may be pushed to seek other financing during an emergency, such as a payday loan. As much as these loans are convenient, the high interest rates mean that they cost you much more than you would expect.

 

Getting it Sorted

If you are living from paycheck to paycheck, you may believe that it is close to impossible to even think about setting up an emergency fund. In this type of financial situation, it actually is crucial that you do so. Getting started is easy, as long as you are willing to take one step at a time and believe in the process. To begin with, ensure that everyone in your household is on board with you and wants to do whatever is possible to build up the fund. Next, start putting aside small change and any little savings that you make by cutting back on a daily basis. These small amounts are able to accumulate, and over time, you will find that the fund begins to grow. Additionally, you may create one more stream of income by monetizing a hobby or something that you do in your spare time. This way, you will be able to put aside all the income from this venture into your emergency savings account.

 

With these tips you are well on your way to creating an excellent emergency fund, yet there are some mistakes that you should avoid making. The first one is deciding that your retirement savings can be used for your emergency fund. These are two separate accounts, and you need to plan on how you can fund them separately. Also, avoid using credit cards as your back up for an emergency. They will cost you more than necessary. Make some sacrifices now, and you will appreciate it in the future.

It's only fair to share...Share on FacebookShare on Google+Tweet about this on TwitterDigg thisShare on LinkedInEmail this to someone
22 Aug
Trading forex

Planning your finances for Forex Trading

Depending on who you interact with, you may be told that the most essential part of forex trading is having an excellent strategy. However, it may be argued that what you actually need is a sound financial plan so that you can trade with ease. Forex trading, like any other trading, need one to understand various factors. Of these, risk is the one that can cause the most distress, and affect the way that a person is able to trade. For you to manage your risk, you need to manage your money which is where planning your finances comes in. Any money that you want to put into forex trading, should be money that you are willing to lose in the worst case scenario. When you do this, you will find that you are able to make decisions that are not emotive, which rapidly increases your opportunity to take some risks so that you can get excellent returns. Here are some parameters that you can use: –

 

  • Put Your Plan in Writing

Thinking about your finances and doing mental calculations is not enough when you are exploring forex trading. You need to ensure that your reasoning on how you want to spend your money to trade is as detailed as possible. This means that you write down why you want to make certain trades, what you are hoping to achieve and how you will monitor your progress. When you do this, your plan will be able to take shape and you will have an idea of when you should change what you are doing. The way that you record your trades is also important, as you will need to refer to this information to see if there is any historical data that can help you make decisions in the present.

 

  • Ensure you Control your Finances

Understanding what is happening with your finances is also important for planning when forex trading. First, you have to have an idea of how much money that is at your disposal for trading. Next comes the strategy bit, where you calculate some risk and reward ratios to see what levels would be acceptable for you. After this, consider the level of risk that you are comfortable with. Carry out extensive research on what is happening within the financial markets, and other stock markets, as this may affect the finances that you put into forex trading.

 

  • Get Organized

You need to create some sort of routine when it comes to your trading, so that you are not simply trying to capitalize on trading at any day and time. Within this, you should also develop a detailed checklist of what you want to achieve during a day of trading. This checklist will include what you should be looking out for in the market, the signal you need to see so that you can enter a trade, when you believe would be the right time to pull out. It does not need to be the save every day, but it will work as an excellent guide.

 

There are so many things that you can do to help plan your finances for the purpose of forex trading. These are some excellent options for you to explore so that you can get started. There are some pointers that you should think about to ensure that you achieve success. To begin with, you must take your emotion out of any trade that you are making. Furthermore, if things seem to be going well, you should not get caught up in greed. Keep to your checklist and you should be fine when making decisions.

It's only fair to share...Share on FacebookShare on Google+Tweet about this on TwitterDigg thisShare on LinkedInEmail this to someone