Most who embark on trading with their own capital are acutely aware of risking only surplus funds they can afford to lose, separate of money already budgeted to support the home and family.
It seems a simple equation: Income greater than Expenses = Cash Surplus = money to apportion as capital to risk in the trading account.
Still, many continue to trade without being precise on how much they can afford to add to the trading account, month-on-month.
It is necessary to estimate on a net basis how much cash you can really afford to risk, before adding on the profits from trades and the associated costs (3rd party data services, etc.) to support your home business.
Below lists the minimum Income and Expense components, necessary to arrive at a month-to-month cash flow budget. The components of this Home Budget have been incorporated as a spreadsheet into the Trade Plan, as part of the Home Options Trading Process.
Income Items
– Salary, Interest/Dividends & Other Fee-based Revenue.
Expense Items
Retirement
– Contribution to retirement account, Stocks & Annuity.
Self-Education
– Certified Courses, Workshops (within 1 week) & Technical literature/videos (electronic media).
Contingencies
– House repairs, Car repairs & Emergencies/Unexpected.
Home
– Home Loan / Rental, Utilities, Home phone, Mobile, Home maintenance,
Home improvement & Home security.
Everyday Living
– Groceries, Child care, Dry cleaning / Laundry & Maid/Housecleaning service.
Transport
– Gas, Insurance, Repairs, Car wash/ servicing, Parking & Public transportation.
Health
– Gym/Club Membership, Health Insurance, Prescriptions, Vitamin Supplements, Veterinarians/pet medicines & Life insurance.
Subscriptions
– Publications, Newspapers, Internet Services, Radio License & Television License.
Personal
– Clothing, Gifts, Hair Salon/Barber & Hobby Items (Non-technical books/CDs, etc.).
Charitable Donations
– Charity, Environment & Spiritual.
Entertainment
– Concerts/Social Events/Movies, Dining Out & Vacation.
The question that needs to be answered is: Income – Expenses = What proportion of savings is left–over to trade with; and, how much is needed to top up the account per month given your Portfolio's Performance? Any business needs its capital replenished or risks shortage of funds to continue as a going concern. A Home Options Trading Business is no different.