May 9, 2016, 8:50 pm

Quick Guide to Understanding Binary Options

by: The Financial Blogger    Category: Investing Ideas

 

 

When I first read the words “binary options” I wasn’t sure what it meant. Even though I have a strong background in financial products, the industry keeps introducing new ways to invest. Some of them are complex and hard to understand (not to mention they could be very risky) and some others, like binary option trading are quite simple, yet unknown to the public. I’ve dug into this topic with the help of Banc De Binary to offer you a quick guide about this relatively new investment product.

 

What is binary option trading?

Binary options’ rose in popularity back in 2008 due to heavy market swings. In fact, this is a great vehicle to benefit from market volatility. It has gained in stature both among investors looking for a simple and profitable way to trade, and also among first-time traders hoping to better understand the markets and grow their assets. As opposed to other types of investments requiring you to do heavy research on various metrics, binary options simply require that you choose a market direction for a specific asset. Binary options trading is solely based on the direction the asset will take (up or down) and you can trade on both.

 

Here’s an example:

For example, assume you think company XYZ is doing well and you think the stock price will rise momentarily. On the binary options platform, you see the potential return is 85%. If you buy the option for $100 and the XYZ goes up, you will earn back your $100 plus $85. If the stock goes down, you lose your $100. If the stock is back at the same price at the option expiry, you get your $100 back.

 

How to successfully trade binary options

At first, this seems complicated as you must determine where the asset will go: up or down in a short manner of time (these options are usually traded and expire the same day). The idea here is more to “trade based on the events” of the day than thinking long term. For example, when there is a catastrophe happening (like the huge fire in Alberta, Canada since the beginning of May), you can think that Canadian insurance companies along with oil sands companies will be affected.

Finding this information is not always easy.This is why it is recommended to find a brokerage service providing you with a list of events each day telling you what is happening on the stock market and how it will affect various asset classes. After reading these, you can then login to your binary option platform and look at the potential return for each asset. The usual expected returns vary between 70% to 90% per trade. But don’t forget that if you are wrong, you lose 100% of your investment. This is why it is a good strategy for a part of your portfolio but definitely not for your entire nest egg.

How to trade binary options

There is an easy 4 step process to complete if you want to start trading:

  1. Select the asset you wish to trade.
  2. Select the expiry time for the trade.
  3. Enter the amount you wish to invest in the trade.
  4. Click ‘call’ if you believe the asset value will go up, or ‘put’ if you believe the asset value will go down.

 

As you can see, all type of investors, beginners to advanced can benefit from this new investment vehicle.

 

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May 9, 2016, 8:12 am

7 Accounting Tips for Small Business Owners

by: The Financial Blogger    Category: Business

You probably didn’t start a small business because you were excited about keeping the books. But even if accounting is your least favourite task, you must stay on top of your business’s finances. Once you lose track, it’s easy for it to slide into a huge mess that you need a professional to fix. Use these tips to get an early handle on the accounting for your business.

Keep Track of Business Expenses

You should separate your business and personal expenses and keep detailed records of your business expenses. An easy way to do this is to set up a business bank account or credit card; then you won’t have to save a million receipts, as the bank or credit card records will be your digital copy of your business expenses. Refer to these records often so you can see how you’re spending your money. You’ll also need them to keep track of tax write-offs for business expenses.

Monitor Your Labour Costs

Labour costs are probably your biggest business expenditure. Do you pay overtime? Offer benefits? How much do you pay yourself? Make sure you’re not over- or under-paying your employees (and yourself!) by taking into account the perks your business offers. If you have money left over in your labour budget, you can offer your employees incentives. If you’re over budget, it may be time to cut the overtime or find a new benefits provider.

Use Online Accounting Software

Unless you have an accounting degree, you’re probably not going to get very far figuring out your business’s budget in an Excel spreadsheet. Online accounting keeps your records organized, offers business insights, and helps you with invoicing, too. The software makes a lot of those complex accounting concerns easy for small business owners to handle, and having all your accounting needs in one place makes your life as a business owner so much easier.

Set Aside Weekly Accounting Time

To keep your business finances in order, you have to sit down with them, uninterrupted, at least once a week. As long as you’ve got a good accounting system in place, going over your finances shouldn’t take more than a few minutes each week. Taking a regular look at your finances helps you see where your business is doing best and where you may need to make some changes. Plus, it makes doing your taxes much easier when the time comes.

Know Your Overhead

You probably know what your rent and utilities cost each month, but are you prepared for legal fees? What about interest or repairs? Every cost of running your business that isn’t direct labour, materials, and expenses counts as overhead. Basically, anywhere you put money that doesn’t directly create a profit is your overhead. Do you know what yours is? Estimating won’t cut it; overhead can cost you more than you intended if you aren’t paying attention.

Keep Detailed Inventory Records

You need to know every detail about your inventory, including when items come in late or when you don’t receive them at all, and whether there was any damage. Similarly, you have to keep track of when products go out to customers. Try out cloud-based inventory software, which helps you manage your inventory and assists you with business-to-business transactions, operations, and sales. The closer you can get your inventory records to real time, the easier your business life will be.

Follow Up on Invoices

Image via Flickr by GotCredit

Invoices, above all else, should be in pristine order at all times. You need to know when they’re due, who has been paid, and who owes you money. If you don’t get paid for services or products rendered, your business’s source of money will dry up quickly. Plus, the longer you let an invoice go without payment, the harder it’s going to be to get money from that client. Invoices are also the best way to figure out which customers you may not want to work with again.

Accounting might not be the most exciting aspect of owning a small business, but it does offer you considerable insight into how your business is running. Keep track of your finances to keep your business healthy!

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April 26, 2016, 8:22 am

How to Know if Binary Options Are Right for You

by: The Financial Blogger    Category: Investing Ideas

If you’re like most people interested in investing, you’ve heard about binary options by now. While they’re still a very new investment vehicle, they have so many advantageous features that countless people all over the world have made them their number one choice. However, that doesn’t mean you should necessarily go putting your own money into them right away. Instead, consider the following about trading binaries before you start doing it yourself.

Do You Have the Time to Learn?

binary options, trading binaries, binary options trading

This needs to be the first question you ask yourself before you start trying to make money with binary options trading. While it’s true that one of the reasons binary options are so popular is because of how straightforward they are, they’ll still take time to learn so you’re a competent trader. You can’t just begin trading today because you have the money. Doing so is sure to end in losses and you’ll most likely become disillusioned with this opportunity.

No, you don’t need a lot of money to begin trading, but why waste it? Read up and educate yourself on binary options trading before you take the plunge.

Keep in mind, too, that you’ll most likely need to read up on a specific type of asset. Unless you already have a background in one you’ll be trading binary options in, you won’t be ready for this opportunity until you spend time learning about a particular asset to specialize in. Just pick one for now. Later, after you’ve had some success, you can decide to specialize in others too.

Can You Afford to Trade Binary Options?

Again, trading binaries is extremely affordable. However, you shouldn’t treat it like you’re playing cards or otherwise gambling for fun. People all over the world from all kinds of backgrounds have struck it rich because they dedicated themselves to binary options.

Still, just like how it will take time to learn the ropes, you’ll also need sufficient funds in the beginning too. Obviously, the longer you take to learn, the less you should have to worry that those funds will go to waste. What you don’t want, though, is for limited funds to force you into irrational decisions. Expect that you’ll accept some losses in the beginning, but that this is par for the course.

Also, make sure your finances are relatively sound at the moment. You’d hate to have to stop trading abruptly because you’re just about to take on a mortgage or new car payments.

You’ve Found a Quality Broker

Even if you have all the time and money in the world, you won’t succeed with binary options if you don’t have a good broker to facilitate your trades. What exactly a good broker is will depend on you and your unique needs.

As a beginner, though, you’ll definitely need someone who can help usher you into the world of binary options trading. Amongst other things, this will mean extremely user-friendly software—you really don’t need another challenge at the moment.

You should also look for a broker who can provide you with educational resources as well. This shows that they’re actively interested in your future as a trader, not just taking your money for short-term gains.

Don’t pick a broker simply because they offer great deals. A lot of them are scams anyway and, even if they’re not, none of them are worth putting your investments at risk.

Binary options could supply you with nice earnings on the side or eventually become your sole source of income. Before you begin trading binaries, though, you need to make sure you’re ready.

 

 

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April 20, 2016, 6:01 am

Using the Bucket System

by: The Financial Blogger    Category: Personal Finance

 

Budgeting… wow, this is something I haven’t done for soooo long!

 

As you can see, I’m becoming a lot more conscious about my debt repayment plans this summer. Once my wife starts her daycare in September, I want to put a super solid plan in place where we will kill our consumer debts within two years. In order to ensure my goal is achieved and I actually put this plan to work, I’ll setup a “bucket system” where I will pay myself first into several accounts.

 

What’s a Bucket System?

 

A bucket system is definitely not a new approach to personal finance. Many of my good friends use it and it definitely works. However, it requires discipline and a strict budget (or a lot of money coming in, hahaha!).

 

The goal is to receive all your income into a single account which is already the case for my wife and I. Then, the money is distributed into several other accounts called “Buckets”. Each bucket has its own purpose. Depending on your goals, you may have 1, 2 or 10 buckets. It’s a very effective way to make sure the money you earn is used for what you really want.

 

It also minimizes surprises in your budget. For example, I pay my municipal taxes as required by my city. This means that I make about 9 payments throughout the year to pay them in full. So I have some months where my municipal taxes are “free” since I don’t have to make a payment and others when I have to find about $400 to pay my bill. This $400 is sometimes a “surprise” in my budget when it happens. With the bucket system, I could easily split my yearly tax amount to be paid into 26 bi-weekly payments where I could take money from my bank account and save it in a bucket. Each month I need money to pay my taxes, I simply have to withdraw it from the bucket and it doesn’t affect my regular bank account.

 

My Own Bucket System

 

Without knowing so, I’ve already started my bucket system with my RESP and TFSA systematic investments. I will now just create more buckets to make sure my budget is under full control and that I concentrate the bulk of my extra cash in paying down my debts.

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I already have my RESP and TFSA setup this way as I mentioned before. This money is automatically invested in mutual funds as it is free of transaction fees therefore it helps me manage a small amount of money. Eventually, I’ll probably buy stocks with my RESP as it is growing rapidly.

 

The line of credit payment will be used to drop it and generate liquidity. Each time I have enough room on my line of credit to pay off another debt as my pool loan is at 6.45%, I will draw a check from my line of credit to pay it off completely. I will then apply the debt snowball method to increase my line of credit payment and clear the next debt. The goal with this strategy will be to decrease my monthly payments used to pay consumer debts. Then, I will convert a part of my home equity line of credit debt into a flexible variable rate home loan.

 

Then, I will create three more buckets where money will be systematically invested in money market funds. I will grow an emergency fund for both house and car maintenance. The “fun account” will be used for several purposes such as paying for gifts, clothing, vacations and sporting activities.

 

Buckets are Restrictive but Efficient

 

The reason why I’ve been avoiding buckets my whole life is due to their highly restrictive aspect. Since the money is leaving your bank account as soon as it is being deposited, you have no room for extra spending. This is why it’s important to have a well balanced (and positive!) budget before you start with a bucket approach. There is no point of saving your money into buckets if you are about to take that money out to finance your lifestyle all the time!

 

On the other hand, buckets are highly effective since they serve a single purpose: putting money aside! The good news is that if my car doesn’t require maintenance this year, I will have a lot of money saved for bigger repairs in the future; same thing with my “fun bucket”.

 

The bucket system will start for my family in October 2013. Since we have committed to several expenses for the daycare between June and August, I will need the $2,000 generated from the daycare to balance my extra spending from the summer. Then, in October, I should be ready to start a new life!

 

Readers, have you tried the bucket system to manage your personal finances? How did it go?

 

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April 19, 2016, 7:11 am

Protect your Hog: a Motorcycle Insurance Comparison Guide

by: The Financial Blogger    Category: Insurance

One of the caveats of riding a motorcycle is that riders face a higher risk of getting into an accident when compared to drivers of standard cars. Yes, there is nothing that can compare to riding a motorcycle on an open road with the wind hitting your face, but you have to remember that you’re also subject to a greater amount of personal risk due to the lack of sufficient protection from external forces. Motorcycles are also harder to control when compared to a standard car, which is even more apparent during hazardous road conditions, such as when it rains or if there’s snow on the road. If you use a motorcycle on a daily basis, you need to know about the different types of insurance plans out there and which ones would be the most suitable for your needs.

 

Comprehensive Physical Damage Insurance (CPDI) for Motorcycles

While most states require a motorcycle rider to have some form of liability insurance, what happens when your bike gets damaged in a non-accident related event? Instances like this occur not as a result of the actions of the motor vehicle owner; rather, because of external events outside of their control. For example, hitting a deer is considered a frequent motorcycle accident in Georgia, especially during night biking. Theft and vandalism of particular motorcycle models is rampant in Los Angeles. Severe weather and hail are also other common external culprits behind why bikes get damaged. If you live in a state where these incidents occur, it is highly recommended that you acquire comprehensive physical damage insurance for your motorcycle since this can help immensely in paying for damages to your bike.

 

Collision Insurance

Collision insurance is another type of insurance that you should consider getting since it involves damage resulting from hitting another vehicle. This type of insurance will either help you pay your bike repairs or give you the equivalent cash value of your motorcycle in case it was damaged irreparably during the accident. Do note though that the cash value uses the current value of the bike based on usage. The present value is calculated using the number of years that the bike has been in use, divided by the estimated lifespan of the motorcycle. The percentile outcome of the calculation is the amount that the insurance covers.

 

Bodily Injury Liability Insurance

This type of insurance covers the medical bills of the injured party during a motorcycle accident. For example, if you suddenly lost control of your vehicle and hit a pedestrian, their medical bills would be covered by your liability insurance. However, bodily injury liability insurance does not cover your medical expenses. If you also sustained injuries in the accident, you will need to rely on your personal health insurance coverage to pay for the treatment of your wounds.

 

Nearly all U.S. states require liability insurance for motorcyclists. Before you consider any other type of insurance package, you should have a good liability insurance plan in place. Without it, you’re likely to be sued by the person you accidentally hurt, and this can lead to a lengthy, expensive court case.

 

These are the top three types of insurance that all motorcycle riders should at least consider before using their hogs on the road. If you want a more extensive motorcycle insurance comparison, you can visit sites like CoverHound, which shed further details on other types of motorcycle insurance available. Medical payments insurance and uninsured motorist coverage for motorcyclists are some of the other insurance options that could be useful depending on your needs.

 

Should I get them all?

The best possible scenario for any motorcyclist is to have a comprehensive protection package that includes liability, replacement, accident and physical injury insurance. However, not everyone can pay for such a thorough policy. You should first get liability insurance, and then accident insurance, since this helps to cover the most common incidents that you’re likely to encounter. More extensive insurance plans can be added on an “as needed” basis depending on your perceived needs.

 

Just remember, while riding a motorcycle down an open country road is one of the best experiences imaginable, you should not be reckless in traveling without any form of insurance.

 

While some of these insurance plans are optional, hopefully this comparison guide has enlightened you to the different types of policies available. Remember, don’t be foolish and leave home without a proper insurance package. You may think that you’re an excellent rider, but accidents can happen to the best of us, no matter how careful we are.

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