Quality #8: Financial Backup
“A part of all you earn is always yours to keep”
-The Richest Man in Babylon, George S. Clason
Trading in the market has its infinite variables you’ll need to prepare for. On top of that, you’ll need to prepare for the unexpected that life will throw at you.
That’s why financial backup as a day trader is a must.
It may even be the crucial difference between your success or failure. Your account will require constant capital in order to generate profits.
And you’ll also need constant capital in reserves.
How to Establish Financial Backup
- Income: Financial backup is not possible without a reliable source of income. At a minimum, you need a living wage to manage liabilities and acquire assets. Think of your income as an army. If you want it to grow stronger and gain more territory, you’ll have to recruit more soldiers — or in this case dollars and assets to grow income. That ultimately makes you the general. It’s up to you to earn income and allocate it to the important things in life. And that includes your future.
- Account for Inflation and unexpected emergencies: According to a 2018 report from the Federal Reserve Board, 40 percent of Americans can’t cover an unexpected expense of $400. You can point to wealth inequality and excessive consumer culture. But the fact remains, financial literacy is a personal responsibility. Make sure you move a percentage of your income to assets that keep up with inflation and give you a safety net. That can even include your trading account, 401k, or your small business.
- Get professional help: If you have too much on your plate, you can delegate your financial backup plan to a professional financial planner. That way, you can focus on your day trading while they deal with the boring stuff such as marginal tax rates and inflation on your behalf.
- Plan for a future without you: Nobody likes to think about their death. In fact, people take living for granted sometimes. But what’s the point of wanting to live life as you wish without sharing it with others? What’s the point of building wealth if you can’t pass it on? Make sure the people you care about are set up for success in case you pass away. That means having a will and life insurance set up. If you have people that depend on you, it’s your responsibility to set them up for the future.
- Set up recurring transfers: You can save a lot of time when you set up recurring transfers or automated trades that fit your trade strategies. This way, your income can get to work by backing up your financial plan without having to log in to certain accounts manually. A second or two makes all the difference when you want to focus on time-sensitive trades.
Is it in Your Control?
We can’t see what life will throw at us. But having some kind of financial backup will be crucial to your success. In case you get a margin call, you want to have designated funds that serve as your safety net.
And even if obstacles get in your way. The question you need to ask yourself is “can I do anything about it?”
Always focus on what’s in your control and what you can prepare for. Anything outside of that is for the birds.