Getting Started
Where I started
I started my financial journey through buying and selling funds, utilising the yearly ISA allowance. This allowed me to gain an understanding of how the financial markets worked (broadly) and the importance of savings (from the monthly income). I started with £25 per month in one fund, back in 1990 and now have a portfolio of funds, manage my own SIPP (Self Invested Personal Pension) as well as being a Day-Trader.
Although I have fully embraced all things money related, you can do some or all of what I do, it’s just a matter of learning and starting. I am teaching both my Sons to invest (and trade if they wish too), and I have helped people create and manage their own portfolios and trading systems.
I am happy to share what I do and why, but I appreciate everyone is individual and their attitude to risk will be different to mine. However I am happy to help in any way I can, which is why I created this site.
Trading vs Investing
The core difference between investing and trading is the time horizon and the method used to generate returns.
Investors focus on building long-term gains, slowly over years, through buying and selling investments, e.g. stocks, funds, bonds, property, etc.
Traders focus on capturing short-term market price movements over days, hours, or minutes. It typically involves buying and selling assets, e.g. Stocks, for short term gains, and they are primarily focused on share price when making decisions.
So it's worth spending some time to understand your financial goals. I.e. are you looking to save for retirement, or a big event in some years time in the future or increase income in the short term/now.
Your financial goals are important because it drives what you do, how and when. It allows you to create an investment/trading plan and drives focus and action.
Without a clear plan it’s harder to achieve your goals.
How Much Money is Enough?
When planning your strategy, taxation must be accounted for. The easiest way to do this is to use any on-line salary calculator to provide you with how much Tax and NI you will need to pay, depending on how much you make/are planning to make. Extract this money monthly and keep in a separate account as your gains will need to be declared on your personal tax return. Seek professional tax advice if you’re uncertain.
I believe there are 3 main areas to consider……
Living Money
This is the amount of money you/your family requires per month. Ideally this figure should be GROSS.
This figure should be what’s required for you/your family to “exist” and should not include any luxuries such as holidays, day trips, entertainment, etc.
It’s a good exercise to go through to understand where you’re currently spending your hard earned cash. You then have the option to change things if you so wish.
Lifestyle Money
This is the Living Money amount plus the luxuries (cars, holidays, entertainment, etc). Again, this should be a monthly GROSS amount.
Financial Freedom
This GROSS figure should be the monthly amount that enables you to do what you want, when you want. Although it’s a bit arbitrary, it does allow you to consider what you would like to do if money was not an issue/blocker.
Some people consider legacy projects such as leaving a company or properties for kids, or a long lasting community/charity project. This will be very personal to you.
Some or all of the above will be applicable to you. This is a very personal journey, and helps to define a long term plan for financial freedom, whatever that means for you.
