Money Management

Good day, ladies and gentlemen. Today I would like to touch on such a not entirely obvious topic in forex trading as managing free money. There are 2 stages: 1. Earn money; 2. Spend it, or invest it.

Anyone can handle spending money perfectly well even without advice, but about investments, or rather not so much about investments as about managing money in everyday life, I would like to talk in more detail. Everything stated below is personal experience. No couch analytics.

The advice below will be useful both to those with a very small income and to those earning fairly decent money. Somewhere up to a million rubles per month. If you are a hardened oligarch, you are unlikely to find anything useful here)

I often advise withdrawing half of what you earn on forex every month. Many do not understand why. There is an illusion that if you constantly put everything you earn into your own trading account, you will very soon become a billionaire. This is not so. Think about it: why do owners of factories / steamships invest money in other people's enterprises? Invest in funds, etc.? Why do they not invest all the money in their own enterprise?

The answer is simple: diversification. It reduces risks and gives emotional peace of mind. And this is very important.

There is an illusion, supported by sellers of scam courses, that there is some opportunity to invest 100 dollars and get a million rubles in a couple of years, or better yet dollars. As examples they cite Apple stock or Peter Thiel, who invested in Facebook at an early stage. These cases are only exceptions to the rule, and counting on you being just as lucky is, at the very least, unreasonable.

Money makes money, whether you want it or not. Huge returns are possible only if you yourself work hard in the business you invested in. That is, if it is your forex account or your business. Investments, on the other hand, are passive money management. That is, when you do some calculations once, invest funds, and then someone else does all the work.

If you open your own business with your own money and work in it yourself, this is not investing but self-employment. A person's resources of time and energy are very limited, so we will not consider self-employment in this article. We will talk specifically about investing.

It may seem that there are countless instruments for investment, but in fact they are divided into a small number of groups:

Leave such nonsense to naive schoolchildren and trusting alcoholics. You can make money on pyramids and projects like "invest 100$ - get 100000$" only if you organize them yourself. That is, you stand at the top of the pyramid and money from foolish simpletons flows into your pocket.

The main and simplest way of investing free funds available to ordinary mortals. Although many neglect it, citing low returns. This is not from great intelligence, but from a small amount of money. In fact, having a total of 30 million rubles on deposit at an annual interest rate of 8-10% already means you can avoid working at all. And this amount is not that large, believe me.

The main advice when using bank deposits is, of course, to distribute money across deposits of no more than 1.4 million rubles per deposit in one bank. Because this amount can be received back through insurance if the bank closes. What should you do if you have run out of suitable banks, that is, you already have the maximum insured amount everywhere? Involve relatives, spouses, children, and so on. Just do not forget that you must trust this person completely.

How can you find deposits with a good interest rate? To search for deposits with suitable conditions (in current realities I advise targeting a rate of 7-10% per annum), it is convenient to use the website http://www.banki.ru/.

But still try not to invest money in completely shady banks. Check reliability by the annual Forbes rating.

You should understand that the more reliable the bank, the lower its deposit interest rates. The golden mean is to open deposits in banks that actively lend to the public. At the moment these are TKS, Binbank, Russian Standard, Renaissance is aggressively entering this market, and so on. The point is that the bank has a good cash inflow from those who take loans and pay huge interest, and this gives the bank the opportunity to give us high interest on deposits. And since the profitability of lending is high, the bank has no need to engage in gray operations like cashing out, and the probability of its closure is low.

Another piece of advice: sometimes banks have "tasty" deposit offers. You need to catch them and open a deposit for a long term. For example, during the 2008 crisis it was possible to open a deposit in some banks with a yield of up to 17% per annum.

Do not forget about diversification. We invest money both in deposits with high rates in "progressive" banks and in banks with high reliability but a small percentage. The most important thing is to avoid Sberbank at all costs.

The downside of deposits is the loss of interest when closing the deposit. If there is a chance that you may need the money, you can put it into a current account with interest accrued on the balance. You can withdraw money at any time and interest is accrued every month. Such accounts are available at Binbank, Promsvyazbank, and Unicredit Bank.

Is it worth opening deposits in foreign currency? It is. Although interest rates on foreign-currency deposits are much lower, this is another diversification tool that should not be neglected. Besides, the low rates are often offset by exchange-rate growth.

More than that, accumulate your money supply in foreign currency. It can be in a deposit, it can be in a forex account, it does not matter. The point is that the dollar rises sharply once every N years, and the ruble... you know.

Try not to take loans (in any form) and do not lend money. And everything will be fine for you.

An exception can be a "good" loan for running a business, for example buying equipment in installments.

In general, debts, when you have them, eat a hole not only in the budget, but also consume your energy. Although this is again not the topic of this article.

An exception is credit cards with a grace period, when for some period, usually around 1-2 months, you can repay the debt without interest. That is, you bought something for 10000 rubles and, if you repay this debt within a month, you do not owe the bank any additional pennies for the loan. But be careful, it is very easy to get carried away by consumerism. Consider such credit cards as a tool: for example, when there is not enough money for a purchase on a debit card or for booking a hotel on a trip. By the way, it is better to book hotels with a credit card rather than a debit card, because it is easier to remove the blocked amount from it in case of cancellation.

Strange as it may seem, plastic debit cards also make it possible to increase your money. First of all, we are talking about cards with interest on the balance. That is, you spend money from the card and at the end of the month receive interest on the unused funds.

Such cards are available from "Uralsib" (5.5% on the balance), TKS (8%), Rocketbank (a brand of Interkommerts Bank, 8% on the balance). Recently, Ibank appeared, a brand of Renaissance with interest on the balance.

Another way to save a little is the Cashback option. That is, the return of a small percentage from purchases to the card. Previously, this existed only for credit cards (which we, of course, do not use), but now debit cards also have cashback. Examples are, again, TKS and Rocketbank, Binbank, Ibank, Promsvyazbank (All Inclusive card).

You should have many cards. Because they can be blocked at any moment with or without a reason (it happened to me more than once). And the prospect of being left without money in another city, or even abroad, is not very pleasant. Therefore, do not limit yourself to a card from one bank, make about 5 in different ones.

Never apply for GOLD and Platinum cards if this requires additional expenses. The status value of such cards has long been devalued and you will get nothing except extra service fees.

Personally, I do not like cash, but you should have it. Both rubles and foreign currency. Determine the amount yourself, but this money should be enough for you to live calmly for about a month. In case of war, an alien invasion, or the collapse of the banking system. Anything can happen in life.

I recommend keeping money in a safe. The safe itself and its installation in the apartment cost very little, and you will be calm about your valuables when calling a housekeeper or plumber.

Mutual funds are often presented as a source of enrichment. But that is not so. The return on average over 3 years very rarely exceeds bank deposits, and management fees and the risks of losses finally kill all the attractiveness of mutual funds. I believe that investing in mutual funds is possible only when there is already absolutely nowhere to put the money.

A very complicated topic. If you think that risks exist only on Forex, you are mistaken. 9 out of 10 new businesses close within a year. Will you be lucky enough to invest in a project that becomes successful? Maybe yes, maybe no. Personally, during all this time I gave a large sum of money for a business to only one person, a good friend. And even then, only because he has serious people with experience as partners. So far this investment has not brought any special profits, but no losses either.

Update: my money got stuck in "debt" mode for an indefinite period. IMHO, it is not worth investing in someone else's business.

To make money on stocks (not active trading) you need to do this from morning to evening. Study a bunch of reports, calculate risks, monitor the market, politics..... That is, it becomes not investments, but self-employment. Forex is more than enough for me already, so I do not buy stocks.

Not manna from heaven, but with good selection PAMM accounts bring in income higher than bank deposits. More details are in the PAMM investing course. Also, every month our Investor's Digest comes out.

I want to note that PAMMs also belong to risky investments and it is not worth investing more than 10% of your capital in them.

"Kiyosaki" does not work in Russia. Therefore, if you hope to take an apartment with a mortgage and pay off the loan through rent, forget it. Or move to the USA.

Buying real estate for investment, not for your own residence, is a very difficult and costly matter. Moreover, this is "long-term" money, since you will be able to sell the purchased apartment without losing on taxes only after 5 years. Therefore, I believe that investments in real estate can begin to be considered when you have 10 million or so in capital. So that the temporary freezing of, say, 5 million does not get in your way.

Unfortunately, my experience of investing in real estate so far is not very successful. In the current crisis situation I do not advise investing in new buildings; if you are taking an apartment as an investment, then either a resale one, or at a stage close to the delivery of the property.

Finally, a couple more simple everyday pieces of advice regarding finances.

Do not keep large sums in virtual systems such as WebMoney, Yandex Money, etc. without particular need. After all, this is virtual money and it is not insured in any way. In the end, hackers can simply break into your account and withdraw your belongings.

Since all electronic payment systems charge a certain withdrawal fee, try to pay online for everything you can with the money you have accumulated. Namely: mobile phone, internet, utility services, tickets, and various purchases in online stores.

Each of us has at least once come across cards that give discounts or accumulated bonuses in various stores, restaurants, and so on. This is nothing other than loyalty programs. Their goal is to make you come back not to the neighboring store, but to the one whose discount card is lying in your wallet.

How do you outsmart the system? Very simply. Whenever possible, we get discount cards EVERYWHERE. That is, we do not feel attached to any one establishment because of discounts, we get freedom of choice + discounts. Which help us save a little.

Buying at sales is not shameful, and most often it is profitable. No matter what your spoiled snob friends say. Moreover, if the items are expensive, you can sometimes save a tidy sum. The most important thing to remember is DO NOT BUY ANYTHING EXTRA. The purpose of a sale for a store is to sell you something unnecessary just because it is cheap. So, at sales we buy only what we would have bought even without the sale. We do not look at anything else, otherwise it turns out not to be savings, but extra spending and a pile of junk in the apartment. This advice especially applies to women ;)

If you often fly to other countries, pay attention to the Duty Free zone at the airport before departure - goods without VAT, which again allows you to save. The principle is the same as with sales - we take only what we would have bought anyway.

Never save on health, food, and your own peace of mind. Everything should be in moderation. There is no need to walk to the other end of town to buy a sack of potatoes 3 rubles cheaper. The time losses are too high. Usually it is better to spend time on earning money than on searching for cheapness.

I sincerely hope that the above tips will be useful to you. And how do you manage your money? Share in the comments :)

Respectfully, Pavel TradeLikeaPro.ru