Money management tips might not be the sexiest topic, but it’s essential, especially for new investors. If you’re just getting started in the stock market, you need to know essential money management tips so you create a profitable portfolio and make sound decisions about your cash.
Many of my subscribers to the Money Map Report have told me they’ve learned great money management tips simply by paying attention to the publication. That’s true. But I’m going to share with you some of my best strategies today so you’re ready for anything that comes your way in the stock market tomorrow.
Why Do Money Management Tips Matter for Investing?
Money management and investing might seem like two different things. The former often deals with things like savings accounts, bills, real estate, and saving for your kids’ college funds. However, money management is inextricably linked to investing and trading.
Imagine that you have $20,000 in your savings account. You’re tired of collecting .000001 percent interest, so you decide you want to open a trading account and start investing.
You fund your account with all $20,000, which might leave you with a couple grand in your checking account, or however much you keep there, but nothing in savings. You figure you’ll grow your trading account through smart investing, then shift some of that cash back to your savings account.
Unfortunately, something goes terribly wrong. You make three poor investments that wipe out your trading account.
Now, you don’t have any money in savings — your “rainy day fund,” if you like — so you’re frantic and stressed out. That’s not a good situation.
Learning good money management tips will help you invest wisely while still protecting your existing assets.
How Does the Money Map Report Help?
If you’re a Money Map Report subscriber, you gain instant access to tons of helpful resources, including more money management tips than I’m about to share here. You’ll get monthly newsletters, weekly reports, entry into my model portfolio, and more.
The Money Map Report exists to help you enter and exit your positions carefully, to separate the good information from the noise, and to get a pulse on what’s going on in various market sectors.
Best Money Management Tips for the New Investor
Now that you’re more familiar with how money management tips and investing tie together, I want to share some of my best strategies. If you’re a new investor, read the following tips carefully so you don’t find yourself in an upside-down position.
The more you research, read, and learn, the better your investments will go. That’s just common sense. Unfortunately, many new investors jump in without learning a thing, and they often suffer serious consequences. Let’s make sure that doesn’t happen to you.
Fund Your Trading Account Conservatively
Remember the example I gave you earlier about funding a trading account with your entire life savings? Don’t do that.
Sure, you can fund a trading account with money you never actually invest, but the temptation is there. You hear a so-called “hot tip,” and suddenly all your money is gone. Investing can become a heady, stressful, and exciting experience, so fund your account conservatively. That’s perhaps one of the best money management tips I can offer.
Your definition of conservative might be different from mine, but use your best judgment. A good rule of thumb is to keep enough money in savings to cover six months of living expenses. If you lose your job or incur a huge, unexpected expense, the money is there to cover you.
Keep a Trading Journal or Log
Another of my best money management tips is to learn from your mistakes. You’ll make them — every investor does — but there’s nothing wrong with failure. As long as you don’t make the same mistake over and over again, you’re learning.
One way to track your progress and better understand your mistakes is to keep a trading journal. Write down everything you want to remember about a given play: when you entered, why you bought, when you exited, why you sold, and what you might have done differently.
Later, when a similar situation arises, you can look back on that trade and apply it to your current strategy.
Some investors prefer pen-and-paper journals, while others keep electronic logs, such as in a spreadsheet. There’s no right or wrong decision. Electronic logs are beneficial because they’re searchable. If you know you want to look up a specific trade, you can search by ticker symbol or other identifying information.
Separate Trades From Investments
Trades are inherently different from investments. The two words are often used interchangeably, but don’t get confused.
In my previous two money management tips, I emphasized the importance of risk management and learning from mistakes. It’s also important to understand your goals.
Let’s say you’re saving for retirement. You probably have a 401(k), a Roth IRA, or a similar account for long-term investments. You might exit positions if a company takes a downturn, but many of those investments will hold for years.
But the Money Map Report teaches you how to execute trades. It’s different.
Think about the word “trade.” Back in grade school, you might have traded your turkey sandwich for your friend’s nachos. That’s a trade. You each got something of value from the other and agreed to the terms.
It happened simultaneously, too. That’s important.
Trading is investing quickly. The trades might not happen simultaneously, but you’ll often enter and exit a position within seconds, minutes, hours, or days of each other. And if you think you can’t make serious profits through trading, you aren’t a Money Map Report subscriber.
It happens all the time when you execute your trades properly.
Ignore the Promoters
You might have heard about “pump-and-dump” scams. They usually involve a promoter with a big platform, such as a huge email list or a big following on social media, who promotes a stock in return for money.
The promoter gets tons of people to buy the stock, which drives up the stock price. In most cases, the only people to win are the promoter and the company behind the stock.
Don’t put stock in these promoters. They’re looking out for number one, and they don’t care if you take a huge loss. Because they have such a large audience, they’re able to actually influence the stock prices, which creates a volatile and dangerous situation.
These might sound like the same money management tips, but they’re not. Promoters are often scam artists, but fads are trends in the stock market. A company releases a new product that gets rave reviews, and suddenly the stock price starts to climb.
Any catalyst can create a fad. Ignore it.
Why? Because you can’t predict when the fad will lose momentum. It’s kind of like yo-yo dieting. You jump on one bandwagon, jump off, and jump on another. The result is inconsistent results, which I despise.
Use Money Management Apps
I’m a strong believer in technology, which is why many of my money management tips involve using tech to your advantage. If you don’t have to do things the manual way, why create more work for yourself?
Money management apps can help you track your trades, get breaking news, calculate your fixed expenses, manage your budget, and more. I can’t recommend them highly enough.
Try several money management apps to find one that suits your specific needs. There are dozens out there, so don’t settle for the first one you try.
Know Your Risk Tolerance
If you don’t listen to any of my money management tips except one, this is the one to follow.
Know your risk tolerance.
Some new investors dive in with tons of cash without realizing that they’re conservative at heart. They want to make money in the stock market, but they want to mitigate potential losses as much as possible. Before they learn that lesson, they burn through a ton of cash.
I understand the desire to jump into the stock market and play around. That’s why many people subscribe to the Money Map Report. However, it can be dangerous if you don’t ask yourself the hard questions.
The money management tips above will make you a better investor. Read them over and over again, print them out, and return to them often.
If you’re interested in learning how to invest in the stock market the smart way, subscribe to the Money Map Report for more money management tips. You’ll get access to fantastic resources as well as ongoing support from me.