The Budget - The Ultimate Financial Management Tool

A carpenter uses a set of house plans to build a house. If he didn’t the bathroom might get overlooked altogether.

Rocket Scientists would never begin construction on a new booster rocket without a detailed set of design specifications. Yet most of us go blindly out into the world without an inkling of an idea about finances and without any plan at all.

Not very smart of us, is it?

A money plan is called a budget and it is crucial to get us to our desired financial goals.

Without a plan we will drift without direction and end up marooned on a distant financial reef.

If you have a spouse or a significant other, you should make this budget together. Sit down and figure out what your joint financial goals are…long term and short term.

Then plan your route to get to those goals. Every journey begins with one step and the first step to attaining your goals is to make a realistic budget that both of you can live with.

A budget should never be a financial starvation diet. That won’t work for the long haul. Make reasonable allocations for food, clothing, shelter, utilities and insurance and set aside a reasonable amount for entertainment and the occasional luxury item. Savings should always come first before any spending.

Even a small amount saved will help you reach your long term and short term financial goals. You can find many budget forms on the internet. Just use any search engine you choose and type in “free budget forms”.

You’ll get lots of hits. Print one out and work on it with your spouse or significant other. Both of you will need to be happy with the final result and feel like it’s something you can stick to.

How Much Money Should You Invest?

Many first time investors think that they should invest all of their savings. This isn’t necessarily true. To determine how much money you should invest, you must first determine how much you actually can afford to invest, and what your financial goals are.

First, let’s take a look at how much money you can currently afford to invest. Do you have savings that you can use? If so, great! However, you don’t want to cut yourself short when you tie your money up in an investment. What were your savings originally for?

It is important to keep three to six months of living expenses in a readily accessible savings account – don’t invest that money! Don’t invest any money that you may need to lay your hands on in a hurry in the future.

So, begin by determining how much of your savings should remain in your savings account, and how much can be used for investments. Unless you have funds from another source, such as an inheritance that you’ve recently received, this will probably be all that you currently have to invest.

Next, determine how much you can add to your investments in the future. If you are employed, you will continue to receive an income, and you can plan to use a portion of that income to build your investment portfolio over time. Speak with a qualified financial planner to set up a budget and determine how much of your future income you will be able to invest.

With the help of a financial planner, you can be sure that you are not investing more than you should – or less than you should in order to reach your investment goals.

For many types of investments, a certain initial investment amount will be required. Hopefully, you’ve done your research, and you have found an investment that will prove to be sound. If this is the case, you probably already know what the required initial investment is.

If the money that you have available for investments does not meet the required initial investment, you may have to look at other investments. Never borrow money to invest, and never use money that you have not set aside for investing!

What Is Your Investment Style?

Knowing what your risk tolerance and investment style are will help you choose investments more wisely. While there are many different types of investments that one can make, there are really only three specific investment styles, and those three styles tie in with your risk tolerance. The three investment styles are conservative, moderate, and aggressive.

Naturally, if you find that you have a low tolerance for risk, your investment style will most likely be conservative or moderate at best. If you have a high tolerance for risk, you will most likely be a moderate or aggressive investor. At the same time, your financial goals will also determine what style of investing you use.

If you are saving for retirement in your early twenties, you should use a conservative or moderate style of investing, but if you are trying to get together the funds to buy a home in the next year or two, you would want to use an aggressive style.

Conservative investors want to maintain their initial investment. In other words, if they invest $5000 they want to be sure that they will get their initial $5000 back. This type of investor usually invests in common stocks and bonds and short term money market accounts.

An interest earning savings account is very common for conservative investors.
A moderate investor usually invests much like a conservative investor, but will use a portion of their investment funds for higher risk investments. Many moderate investors invest 50% of their investment funds in safe or conservative investments, and invest the remainder in riskier investments.

An aggressive investor is willing to take risks that other investors won’t take. They invest higher amounts of money in riskier ventures in the hopes of achieving larger returns either over time or in a short amount of time. Aggressive investors often have all or most of their investment funds tied up in the stock market.

Again, determining what style of investing you will use will be determined by your financial goals and your risk tolerance. No matter what type of investing you do, however, you should carefully research that investment. Never invest without having all of the facts!

Why You Should Invest

Investing has become increasingly important over the years, as the future of social security benefits becomes unknown.

People want to insure their futures, and they know that if they are depending on Social Security benefits, and in some cases retirement plans, that they may be in for a rude awakening when they no longer have the ability to earn a steady income. Investing is the answer to the unknowns of the future.

You may have been saving money in a low interest savings account over the years. Now, you want to see that money grow at a faster pace. Perhaps you’ve inherited money or realized some other type of windfall, and you need a way to make that money grow. Again, investing is the answer.

Investing is also a way of attaining the things that you want, such as a new home, a college education for your children, or expensive ‘toys.’ Of course, your financial goals will determine what type of investing you do.

If you want or need to make a lot of money fast, you would be more interested in higher risk investing, which will give you a larger return in a shorter amount of time. If you are saving for something in the far off future, such as retirement, you would want to make safer investments that grow over a longer period of time.

The overall purpose in investing is to create wealth and security, over a period of time. It is important to remember that you will not always be able to earn an income… you will eventually want to retire.

You also cannot count on the social security system to do what you expect it to do. As we have seen with Enron, you also cannot necessarily depend on your company’s retirement plan either. So, again, investing is the key to insuring your own financial future, but you must make smart investments!

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Dollar Recovers vs EUR, GBP

The dollar kept gaining ground against the other major currencies after Tuesday’s surprisingly strong non-manufacturing ISM data, which were influenced by better conditions in the services sector. The report backs up the Fed’s view that the US economic drop has been limited to the housing and manufacturing sectors, which generated some profit taking after the steep falls from the past week and a half. With heavy stops rumored under the closely watched 1.3280-level, traders sent the euro/dollar pair lower – quickly putting stops in place before triggering buying interest around 1.3260. Further losses will probably be moderate, considering the backdrop of economic events for tomorrow and Friday.

Objectivity Required

I remember when I was heavily invested in the stock market. I had inherited a portfolio of stocks from my aunt- good companies, but nothing that was performing by leaps and bounds. My son was giving me tips on high-tech stocks to get into. I made some good money by following his advice, and then got out right before the tech bubble burst.

The same principle applies to Forex trading, real estate, or trading of any commodity- do not become emotionally "married" to your investment. It is just a vehicle that will, if done right, make money for you. Do not hold on to a loser because your late father worked for the company, etc.

Emotions have no place in the arena of buying and selling.
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Don't know much about Forex

Newbie here! I am here to learn. The previous post really explained to me how the Forex market works. There has been so much hype about Forex investing, with infomercials pushing courses (CHA-CHINGO!) and products to help you "get rich quick" (yeah , RIGHT!) that I need a saner, more methodical approach to the topic.

I did well in stock market investing during the tech boom, and got out just in time- two days before the NASDAQ took its first 500 point drop in a series of major drops, or "corrections" as they are called. Perhaps Forex investing would also be for me- I'll learn more about the topic before I proceed.

Are You New to Forex Trading?

This is an introduction to the Forex Market. also know as The Foreign Exchange market or the FX market. The Forex market is the largest financial market in the world, with a daily average turnover of $1.9 trillion US funds. This is roughly 30 times larger than the volume of all U.S. equity markets combined.

Foreign Exchange is the simultaneous buying of one currency and selling of another. There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency. The other 95% is trading for profit, or speculation.

These currencies are traded in pairs. Two commonly traded pairs are Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY). For speculators, the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies, called "the Majors."

Today, more than 85% of all daily transactions involve trading of the Majors, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York.

Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.The FX market is considered an Over The Counter (OTC) or 'interbank' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange, as with the stock and futures markets.

Forex is traded much like any other financial instrument, using a combination of fundamental and technical analysis.If you'd like to learn how to become a successful forex trader, consider a professional forex training course.


Forex investors will need to understand the logic behind Forex trading. A succesful forex investor will need to:

• Recognize and capitalize on market trends
• Minimize risk and protect open positions
• Build a consistent and valuable portfolio
• React to major economic events impacting global currencies

Welcome to Investing In Forex

As you most likely know, Forex has become one of the hottest investing topics around. I am going to gather all of the information I can find on Forex investing and assemble it here. I want to assemble the largest collection of information for new forex investors so we can all learn the tricks to making great financial gains in forex.

This forex information is being gather from many sources. I can in no way gaurantee its accuracy. Before making any investments please consult with a professional in your area. Of course any investment is risky so always make sure to get professional advice before any investments in forex or the stock market.