How to Invest in Stock Respecting Money Management Rules?
Brief overview of how to invest in stock and manage your money wisely in terms of smart asset allocation to avoid financial stress.
Money management is a skill, which has to be learned sooner or later, if you want to fully enjoy your life and live without financial stress. Many people think, that it is hard to learn how to manage your money, but once you know what you're doing, it really isn't so difficult.
How to invest in stock by respecting money management rules is one of the most essential topics, which children should already start learning in primary schools. If this is not the case in your country, I hope your parents were so smart to teach you how to manage your money wisely. If even this is not your case, then you maybe had to learn managing your money all by yourself the hard way, which is also good, since today you very well know how to do it. But eventually you are one of the majorities of people, who knows nothing about money management. Did you decided to learn how to manage your money? Congratulations! Most of people didn't come so far yet and that's why they have to live with financial troubles from day to day.
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What Exactly is Money Management?
Well, in broader term it is all about how to manage your money. In investment terms, money management is all about smart asset allocation between different available investment classes like savings, bonds, stocks, funds, Exchange Traded Funds (ETF) and so on. But everything starts with savings.
Saving is a habit opposite to spending and many people today know how to spend very well, but don't know anything about saving. Don't get me wrong, I don't mind spending. At the end, we do not live for accumulating money! We are here to enjoy our lives to maximum possible level and these includes spending and we should do it a lot, if our budget allows us to do so. The problem is, when people are spending more that they can afford! And this is very common situation and reason number one for getting in troubles. You can only dream about how to invest in stock, if you do not know how to save first!
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Credit Cards Debt is Your Enemy Number 1!
The bad thing is that we are living in the age of credit cards. Besides, it was newer so easy to get a credit, a loan for a house, new car, you name it. In the times of economic expansion almost nobody is taking wise decisions about money management. Are you aware, how much debt costs you? It is very expensive! How come those bankers have such high salaries? Because you pay for them with your debt on the banking accounts. Getting rid of debts must be your goal number one. If you have problems saving some money, you should read our 10 ways to save money consistently.
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Emergency Fund - Do You Need One?
The second important topic of how to manage your money covers emergency fund. Once your debts are paid off, start saving for a rainy day. You really never know when you're going to have an emergency and need cash. Keep it in an instant or easy access account, and check from time to time that you're getting a competitive interest rate on it. Ideally you should have enough money saved to cover three to six months of basic living costs. If that's unrealistic, just save whatever you can, even if it's only a dollar here and there. Anyone who is on a very tight budget should concentrate on breaking even, and avoiding debt wherever possible. You can read more about Why saving money is so important? from the money saving expert.
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Move Towards Higher Yields Investments
Once the debts are paid off and you have build emergency fund, think about some of the less risky ways to save and invest. Start thinking of higher interest rates saving account, if you financial goals are years from now, you shall start thinking about investing in bonds. And don't forget pensions. It's never too early to start saving for your retirement. You can read more about choosing among best saving accounts and saving bonds.
If your financial situation is stable, then you might take some more risk and make more money with riskier investments, especially on the long run. Maybe you should start investing in investment funds and continue with investing in stocks of single companies. It is very important, that you expectations stay realistic with these investments. Don't be too greedy and always have in your mind, that higher returns are connected with higher risks. This stock for beginners guide is covering how to invest in stock and/or exchange traded fund in detail over several other articles.
Are stock markets you passion? If so and if your financial situation allows you, then you should try trading, but to manage your money wisely, you should only trade with a smaller part of your investment portfolio. Trading is focused on short term, could be even day-trading. This is the most worldwide played web game you can find. It's you against others on the same market; there are Chinese, Russians and others playing the same stock at the same time. You must have special knowledge, good trading plan and cold head to become a successful trader! Would you like to know more about how to invest in stock? Keep reading related articles.
Written by: Goran Dolenc
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