10 Commandments of Options Trading Strategies

Options Trading/Strategies

This blog is about the 10 Commandments of Options Trading Strategies.

Option strategies are the simultaneous, and often mixed, buying or selling of one or more options that differ in one or more of the options’ variables. Call options, simply known as calls, give the buyer a right to buy a particular stock at that option’s strike price. Conversely, put options, simply known as puts, give the buyer the right to sell a particular stock at the option’s strike price. This is often done to gain exposure to a specific type of opportunity or risk while eliminating other risks as part of a trading strategy. A very straightforward strategy might simply be the buying or selling of a single option; however, option strategies often refer to a combination of simultaneous buying and or selling of options.

Options strategies allow traders to profit from movements in the underlying assets based on market sentiment (i.e., bullish, bearish or neutral). In the case of neutral strategies, they can be further classified into those that are bullish on volatility, measured by the lowercase Greek letter sigma (σ), and those that are bearish on volatility. Traders can also profit off time decay, measured by the uppercase Greek letter theta (Θ), when the stock market has low volatility. The option positions used can be long and/or short positions in calls and puts.

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Below are the 10 Commandments of Options Trading:

  • Thou shall always take 100% daily gains or 200% all time gains.
  • Do not fall into temptation and buy during the first 30 minutes of market open. (Selling positions is still permitted)
  • Thou shall not buy calls on green days.
  • Thou shall not buy puts on red days.
  • Avoid greed and do not buy consecutive options on 1 company.
  • Give thyself at least 3 weeks time to play the option.
  • End your suffering and sell if down 50% all time on an option play.
  • Avoid gluttony and do not day trade options. (Swing trades allowed)
  • Be fruitful, multiply earnings and sell covered calls if holding any.
  • Celebrate and binge drink after big gains (or losses)
  • Off topic, but relevant – You absolutely need to be doing a 401k or IRA as well as investing in crypto: 401ks and IRAs offer fantastic tax advantages that straight investing does not. Also if you have an employer who matches you are leaving money on the table by not taking advantage of that. It’s foolish. Crypto is great and should definitely be in your portfolio but it should not be your whole portfolio.
    Sources:
    1- WallStreetBets
    2- Wikipedia

Finance and Binance Breaking News – Top Stories

  • Plotkin’s Melvin Capital to wind down funds
    by /u/bobbybottombracket (Financial news and views) on May 18, 2022 at 10:37 pm

    submitted by /u/bobbybottombracket [link] [comments]

  • Twitter board says it will 'enforce the merger agreement' despite Elon Musk's latest move
    by /u/amnesiac7 (Financial news and views) on May 18, 2022 at 2:56 pm

    submitted by /u/amnesiac7 [link] [comments]

  • Did COVID ruin the FIRE lifestyle
    by /u/moviemail (Financial Independence / Retire Early) on May 18, 2022 at 9:54 am

    hey all, FIREr here. I retired in 2017. Since then, I've been (a) indulging, (b) researching my investments, (c) trying to exercise, (d) working on a hobby blog and (e) trying to do some complex intellectual challenges now and then for stimulation, like right now I'm learning about the various ways to estimate variance for erratic non-normal distributions. The first two years of exploring the FIRE were good (indulgence in whatever I wanted, learning more about investing/stocks, just that new experience of getting up every morning and being able to do whatever I wanted . . . the first two years it was all a new and exciting way to live.) But I stopped the indulging. That had deleterious consequences that caused me to both independently, and by reading Anna Lembke/Andrew Huberman's work, become an expert on the innate systems in our bodies that reward us with pleasure chemicals for some acts, and release pain/discomfort chemicals for other acts. We don't have as much free will as we think. (By "indulging" I do not mean doing drugs or drinking. I've never done that. Again, we have an internal system that releases pleasure chemicals if you do certain things. No need to use external pleasure chemicals.) So I'm not doing that anymore. Currently, the thing that probably gives me the most pleasure is watching stuff from the 80s, when I was a kid/teenager, and getting mentally transported back to that time. (I don't know why, but I am also an empiricist/scientist at heart so I have to acknowledge something that works even if I don't know why it works.) Overall the FIRE life isn't that great right now. Don't get me wrong, I have no desire to go back to work. Clients/bosses/deadlines hovering over you and making you do things you don't really want to do . . . that's not a solution. But as I review my circumstances, I wonder what life would have been like without covid, freely going to places such as a nice gym, traveling, stuff like that. Do you think COVID ruined the FIRE lifestyle? [Edit: Alright all. I'm going to head off. Although this was meant to be a FIRE in covid thread, it looks like my thread may have shattered the illusions some of you have -- i.e., that unlimited money and free time leads to guaranteed happiness. It doesn't. If you overindulge, it will lead to problems. You have to moderate yourself (a lesson that also applies to you reddit addicts who come here to feel that mild anger/combativeness that releases dopamine.) Also, I understand that I may be overly cautious. I'll ponder that. Thanks for the advice.] submitted by /u/moviemail [link] [comments]

  • Daily FI discussion thread - Wednesday, May 18, 2022
    by /u/AutoModerator (Financial Independence / Retire Early) on May 18, 2022 at 9:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • Weekly Self-Promotion Thread - May 18, 2022
    by /u/AutoModerator (Financial Independence / Retire Early) on May 18, 2022 at 9:00 am

    Self-promotion (ie posting about projects/businesses that you operate and can profit from) is typically a practice that is discouraged in /r/financialindependence, and these posts are removed through moderation. This is a thread where those rules do not apply. However, please do not post referral links in this thread. Use this thread to talk about your blog, talk about your business, ask for feedback, etc. If the self-promotion starts to leak outside of this thread, we will once again return to a time where 100% of self-promotion posts are banned. Please use this space wisely. Link-only posts will be removed. Put some effort into it. submitted by /u/AutoModerator [link] [comments]

  • Powell says the Fed will not hesitate to keep raising rates until inflation comes down
    by /u/MiserableWanker (Financial news and views) on May 17, 2022 at 6:25 pm

    submitted by /u/MiserableWanker [link] [comments]

  • Allianz pleads guilty to multibillion dollar fraud, fined $5b, can no longer advise funds in the US
    by /u/rastafunion (Financial news and views) on May 17, 2022 at 4:26 pm

    submitted by /u/rastafunion [link] [comments]

  • Daily FI discussion thread - Tuesday, May 17, 2022
    by /u/AutoModerator (Financial Independence / Retire Early) on May 17, 2022 at 9:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • Moronic Monday - May 17, 2022 - Your Weekly Questions Thread
    by /u/AutoModerator (Financial news and views) on May 17, 2022 at 2:00 am

    This is your safe place for questions on financial careers, homework problems and finance in general. No question in the finance domain is unwelcome. Replies are expected to be constructive and civil. Any questions about your personal finances belong in r/PersonalFinance, and career-seekers are encouraged to also visit r/FinancialCareers. submitted by /u/AutoModerator [link] [comments]

  • Home affordability at 2007 bubble levels, but crash is unlikely: Blackstone’s Joe Zidle
    by /u/MiserableWanker (Financial news and views) on May 17, 2022 at 1:12 am

    submitted by /u/MiserableWanker [link] [comments]

  • China's tech industry faces woes from covid, regulatory crackdown and the trade war
    by /u/Pessimist2020 (Financial news and views) on May 16, 2022 at 7:49 pm

    submitted by /u/Pessimist2020 [link] [comments]

  • Daily thread nuke itself?
    by /u/Midcityorbust (Financial Independence / Retire Early) on May 16, 2022 at 7:03 pm

    u/therapistfi submitted by /u/Midcityorbust [link] [comments]

  • "Social Security will be there when you retire" -- but only 78% there after 2034...
    by /u/davidzet (Financial Independence / Retire Early) on May 16, 2022 at 10:10 am

    Just read this on the fact sheet for workers 49-60: "The Social Security taxes you pay go into the Social Security Trust Funds that are used to pay benefits to current beneficiaries. The Social Security Board of Trustees estimates that, based on current law, the Trust Funds will be able to pay benefits in full and on time until 2034. In 2034, Social Security would still be able to pay about $780 for every $1,000 in benefits scheduled. Learn more at "https://www.ssa.gov/people/materials/pdfs/EN-05-10229.pdf " Edit: The link was going wrong due to a . at the end of the sentence. submitted by /u/davidzet [link] [comments]

  • Daily FI discussion thread - Monday, May 16, 2022
    by /u/AutoModerator (Financial Independence / Retire Early) on May 16, 2022 at 9:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice - May 16, 2022
    by /u/AutoModerator (Financial Independence / Retire Early) on May 16, 2022 at 9:01 am

    Need help applying broader FIRE principles to your own situation? We’re here for you! Post your detailed personal “case study” and ask as many questions as you like, or help others who’ve done the same. Not sure if your questions pertain? Post them anyway…you might be surprised. It’ll be helpful to use our suggested format. Simply copy/paste/fill in/etc. But since everybody’s situation is different, feel free to tailor your layout to your needs. -Introduce yourself -Age / Industry / Location -General goals -Target FIRE Age / Amount / Withdrawal Rate / Location -Educational background and plans -Career situation and plans -Current and future income breakdown, including one-time events -Budget breakdown -Asset breakdown, including home, cars, etc. -Debt breakdown -Health concerns -Family: current situation / future plans / special needs / elderly parents -Other info -Questions? submitted by /u/AutoModerator [link] [comments]

  • Weekly FI Monday Milestone thread - May 16, 2022
    by /u/AutoModerator (Financial Independence / Retire Early) on May 16, 2022 at 9:00 am

    Please use this thread to post your milestones, humblebrags and status updates which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • Daily FI discussion thread - Sunday, May 15, 2022
    by /u/AutoModerator (Financial Independence / Retire Early) on May 15, 2022 at 9:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • Just finished my first year of a ~50% savings rate. Pretty happy, though I know there's a long way to go...
    by /u/fomorian (Financial Independence / Retire Early) on May 15, 2022 at 4:42 am

    My situation: I am 33, living in Toronto. It took my until 27ish to finish my undergrad. There were a lot of years were my income was zero, because I was either in school or unemployed. After graduating from undergrad, I worked for one year, making a couple of dollars above minimum wage, before going back to do an MBA to hopefully improve my wages. It worked, sort of. I graduated in 2020, and after six months of unemployment I got a job primarily because of a connection I'd made during my MBA. The job title is business analyst, and pays 80K gross, around 60K net. I believe I'm underpaid, but I haven't troubled to find a new one because it's a pretty easy job, I don't do a lot day to day. The job is also fully remote, which is a huge plus. I started the job in June 2021, so it's going to be a year in June. I started with 0 net worth after graduating, and I've saved up 30K so far, so almost exactly half of my 60K net. It's mostly just frugality. I live alone, and the rent is about $1400, which is below the market rate. I don't go out much, and my groceries are about $400. I don't have a car because I live pretty close to local transit, and it's pretty reliable. I've put about half in VEQT, about half is in a savings account waiting for a good time to buy in (I know, I know, time in the market beats timing the market, but I think the market conditions are ripe for a reset.) I hope my wages grow a bit this year. A colleague who also did the same MBA as me recently jumped ship and got a product manager job that paid $40K more than we were being paid at our current role. I'm hoping I can do the same, maybe by moving to a fully remote position at a US firm. I think the next couple of years will be dedicated to making that connection somewhere, possibly by working at a company that does both canadian and US operations, working for the Canadian arm and then making the transfer. Also thinking of getting on the property ladder and getting a condo... Though not sure how wise an investment that is without the 20% down payment ready. if I keep to my savings rate at 50%, I'll be able to afford a 20% downpayment in 4 years... depressing thought for a 500 sq foot condo, which is what I'm targeting But chances are I won't be able to maintain that savings rate. I HAVE to move from my current location because of poor air quality, and rates all across the city have crossed the 1700 mark for a 1 BR apartment... So there's some good and some bad, but at least I'm holding my head above water, which I wasn't able to do previously. Here's to all you struggling out there, keep on struggling! submitted by /u/fomorian [link] [comments]

  • Bloomberg: The Men Who Flipped on Bill Hwang Were Trusted Lieutenants
    by /u/Not_FinancialAdvice (Financial news and views) on May 15, 2022 at 4:33 am

    submitted by /u/Not_FinancialAdvice [link] [comments]

  • Shannon's Demon and Other Reasons to Love Bonds
    by /u/alcesalcesalces (Financial Independence / Retire Early) on May 14, 2022 at 12:04 pm

    Intro I have written previously about bonds in "The Luxury of a High Savings Rate; or Who's Afraid of Bonds?" In this post I'd like to highlight a few other reasons bonds may have a place in the accumulator's portfolio. Shannon's Demon, or the Rebalancing Bonus Claude Shannon, the famed "father of information theory," devised an interesting financial game that demonstrates the "free lunch" of rebalancing a diversified portfolio. If you rebalance a portfolio between two non-correlated assets, even if they both have zero average return, you get a positive return seemingly out of nowhere. You can read more about Shannon's Demon and its implications for portfolios here. It's worth noting that the rebalancing effect only gives you an absolute return advantage if the returns of the two sub-assets are approximately equal. The highly-cherry-picked period from June 1986 to August 2010 is a good illustration of this. VFINX (S&P500) and VUSTX (Vanguard Long Term Treasury) had a CAGR of 8.48% and 8.52%, respectively. A 50/50 split that is NOT rebalanced yields a CAGR of 8.50%, or the precise midpoint of the two separate assets. When you rebalance annually, however, Shannon's Demon appears and you see a CAGR of 9.17%, quite a bit higher! The same effect occurs if the two separate assets have different long term returns, but the demonstration is more subtle. For instance, 100% Stock has had a CAGR of 10.46% since 1987 while 100% Total Bond has seen 5.33%. The 50/50 portfolio with annual rebalancing has seen 8.26%. This is obviously not as high as the 100% Stock return, but it is higher than the pure arithmetic average by around 0.37% per year. As Kitces puts it, "Portfolio Rebalancing Usually Reduces Long-Term Returns (But Is Good Risk Management Anyway)." Increasing Timeline Certainty One common thread of questions during the recent downturn this year is what effect the downturn has had on retirement timelines for folks who were approaching their FIRE number. Both stocks and bonds have been battered, making this a particularly unpleasant market run for pretty much any portfolio. That being said, holders of bonds have generally seen them temper downturns and smooth performance overall (link). We can take a more systematic look through two tools available at PortfolioCharts: Financial Independence and Savings Rates. The tools are fairly self explanatory, but when looking at the historical time to FI for a 50% savings rate, a 60/40 portfolio has achieved this in 12-18 years, or a midpoint of around 15 years. When looking at the same savings rate for a 100% US stock portfolio, it's been a range of 10-20 years, or roughly the same midpoint. What you gain from the high equity portfolio is the potential to retire two years earlier; what you risk is the possibility that you're in the workforce two extra years on the long end. Some of this effect can be mitigated by de-risking the portfolio as you get closer to the FI number (see the conclusion for more detail). Another interesting perspective is provided by the Savings Rates calculator. With a 60/40 portfolio, someone looking to retire in 15 years with 80k of income and a 1M FI number could get there with a minimum savings rate of 32% or a maximum savings rate of 70%. That is to say, in the best case scenario a 32% savings rate would have them reach FI in 15 years; in the worst case they'd have needed to save 70% to get there on time. For a 100% US stock portfolio, those numbers are 23% and 87%, respectively, reflecting the better best-case and worse worst-case scenarios. Conclusions Bonds can increase the risk-adjusted return of a portfolio through periodic rebalancing. That is to say, even though overall returns are reduced, the volatility of your portfolio is reduced even more, resulting in a non-negligible "free lunch" return premium beyond what you would expect from the simple averaging of the stock and bond portfolios separately. Furthermore, bonds can reduce "timeline" uncertainty either throughout accumulation or as the saver approaches their FI number. For those curious about how and when bonds can be introduced to minimize overall time to FI, see this great old post on dynamic asset allocation for optimal accumulation and decumulation. Note: Returns are include reinvested dividends and distributions, and are expressed in nominal terms. Inflation adjustment does not change the directionality of the result nor its magnitude significantly. submitted by /u/alcesalcesalces [link] [comments]

  • Daily FI discussion thread - Saturday, May 14, 2022
    by /u/AutoModerator (Financial Independence / Retire Early) on May 14, 2022 at 9:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • U.S. consumer sentiment approaches 11-year low, monthly import prices unchanged
    by /u/FriendsFan30 (Financial news and views) on May 14, 2022 at 12:33 am

    submitted by /u/FriendsFan30 [link] [comments]

  • Maximizing a "4-year stint" as an employee in US tech to finally FIRE: your advice?
    by /u/freshjellybeans (Financial Independence / Retire Early) on May 13, 2022 at 10:51 pm

    Hi, I've accepted a job at big tech that pays very well ($350k+/year). I am from Europe and this is where I plan to FIRE after 4 years of this job (time for my stock to vest). I took this job (my first in the US) as a "fire accelerator" - I've always been very interested in FIRE, but ran my own businesses to get there while enjoying my time and myself. With this job I believe I can easily save 200k/year post tax, which will complete my stash after 4 years. These are very high amounts and I realize I am very lucky. Now I'd like to make a plan to make sure I make the most of it. I am well versed in general investing, but would love to know about saving tips and tricks as an employee in corporate America. Should I do the 401k thing considering I don't plan to retire in the US? Should I do the Roth 401k or the Mega backdoor 401k? Anything else that is smart to do in my position? Thanks! PS: Here's what my company offers: - 401k: 50% on the first 4% - Mega Backdoor Roth IRA - Roth 401k - Flexible Spending Account (FSA) EDIT: Also, I am married and currently live in New Jersey TLDR: new job in US tech, I can save 200k/year, plan to FIRE in Europe after 4 years, how to invest considering this? submitted by /u/freshjellybeans [link] [comments]

  • FIRE: Financial Independence, Recreational Employment
    by /u/spookinspagett (Financial Independence / Retire Early) on May 13, 2022 at 2:10 pm

    I haven’t heard this term before, but just saw it in this article I guess it’s pretty much Barista FIRE, but it’s catchy! Lately I’ve been leaning more toward something like this - work in my software engineer job until I have a solid amount of moolah invested, then do something I feel like I’d really enjoy like working in a music store or opening a dog park bar. I could transition before I actually hit my FIRE number and let my investments grow until I’m there, then retire if I want. (CoastFI?) Of course, employment in general maybe isn’t so “recreational” no matter what it is. I’ve seen many of you do something like this and realize it’s not fun to have a boss and a schedule again so 🤷‍♂️ Anyway, just thought I’d throw another term into the pile of FIRE variations. Happy Friday! submitted by /u/spookinspagett [link] [comments]

  • Are any of the other younger folks out there kind of pumped about this recession?
    by /u/Not_Into_Reddit (Financial Independence / Retire Early) on May 13, 2022 at 1:55 pm

    All the contributions we make to our portfolio at these prices will just grow that much more throughout our lives. Since I'm a good 30 years away from retirement, I've got no reason to sweat. I won't be touching these funds for a long, long time. That being said, I do understand why it's stressful for people that have just retired or are entering retirement soon and that makes me feel guilty about my excitement. Anyone else in the same boat? Edit: I kept this post short and sweet to just get some conversation going about whether other people my age feel similarly about viewing a downturn in equities as an opportunity, but it seems I've evoked some negative emotions in the comments. Yes, we aren't technically in a recession until we complete a second quarter of negative GDP growth. Yes, a recession will likely have negative implications on consumer purchasing power and employment opportunities. And yes, I would feel terrible for anyone who's negatively impacted from these circumstances. It's okay to be excited about opportunities you see for yourself and still have compassion to those that may not share your good fortune. As someone said in the comments, just don't gloat about it. submitted by /u/Not_Into_Reddit [link] [comments]

  • Elon Musk says Twitter deal is on hold
    by /u/Pessimist2020 (Financial news and views) on May 13, 2022 at 10:01 am

    submitted by /u/Pessimist2020 [link] [comments]

  • Daily FI discussion thread - Friday, May 13, 2022
    by /u/AutoModerator (Financial Independence / Retire Early) on May 13, 2022 at 9:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • Weekly FI Frugal Friday thread - May 13, 2022
    by /u/AutoModerator (Financial Independence / Retire Early) on May 13, 2022 at 9:00 am

    Please use this thread to discuss how amazingly cheap you are. How do you keep your costs low? How do become frugal without taking it to the extremes of frupidity? What costs have you realized could be cut from your life without pain? Use this weekly post to discuss Frugality in general. While the Rules for posting questions on the basics of personal finance/investing topics are more relaxed here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • Powell says Fed will fix inflation, calls price stability 'bedrock' of economy
    by /u/Pessimist2020 (Financial news and views) on May 12, 2022 at 10:28 pm

    submitted by /u/Pessimist2020 [link] [comments]

  • Has FIRE distorted your view of money?
    by /u/curiously_clueless (Financial Independence / Retire Early) on May 12, 2022 at 8:04 pm

    There have been a lot of threads about the great recession on reddit lately, and it's dredged up some old feelings. I graduated college in '08, and finally got a job after scraping by on disability till my mid 20s. The recession was rough on me and my classmates, and I always thought it was just a matter of time before I'd lose my job and become an unemployable hobo sleeping under a bridge somewhere. When I learned about FIRE, that seemed like the best way to feel 'safe'. I know it sounds silly, but I my milestones centered around being able to afford basic necessities for life; food, rent, a car every 10 years, etc. I hit FI a few years back and I could finally afford everything I needed, and increasingly, a lot of wants too. The weird thing is I've internalized the 'you can only afford what your investments provide' to the point where I'll catch myself thinking 'damn I wish I could afford that', when if you look at my comp from my day job I can absolutely afford that. It's like I act as if I'm already retired. Has anyone ever dealt with this sort of thing? Is this a consequence of my background or a cautionary tale of not 'living the life you want, and saving for it'? submitted by /u/curiously_clueless [link] [comments]

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Mortgage Calculator

Use this simple and FREE mortgage calculator to calculate the real cost of a mortgage before accepting it. Remember, banks are not your friends. Always shop around and never forget that you are the boss. Negotiate, negotiate and negotiate

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Reverse Mortgage Calculator

A reverse mortgage is a mortgage loan, usually secured by a residential property, that enables the borrower to access the unencumbered value of the property. The loans are typically promoted to older homeowners and typically do not require monthly mortgage payments.Use this FREE reverse mortgage calculator to know the real cost of a reverse mortgage before accepting it. Remember, Banks are not your friends.

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Interest and Rate of Return Calculator

Yield is also the annual profit that an investor receives for an investment. The interest rate is the percentage charged by a lender for a loan. Interest rate is also used to describe the amount of regular return an investor can expect from a debt instrument such as a bond or certificate of deposit (CD).

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Credit Card Repayment Calculator

How do you pay back a credit card?
Here’s how it works: Step 1: Make the minimum payment on all of your accounts.
Step 2: Put as much extra money as possible toward the account with the highest interest rate.
Step 3: Once the debt with the highest interest is paid off, start paying as much as you can on the account with the next highest interest rate.

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Sources:

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What are some financial software products that do not require you to store data in the cloud?

For privacy sake, it is very important for a lot of people to not trust cloud providers with their financial data. Below are some free desktop financial software products that do not require you to store data in the cloud.

1- Intrinio

Reliable, clean data, you only pay for what you use, your data stays on your computer.

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2- LibreOffice Calc : Calc is the free spreadsheet program you’ve always needed. Newcomers find it intuitive and easy to learn, while professional data miners and number crunchers appreciate the comprehensive range of advanced functions. Built-in wizards guide you through choosing and using a comprehensive range of advanced features.

3- Open Office Calc :

Calc is the spreadsheet application you’ve always wanted. Newcomers find it intuitive and easy to learn; professional data miners and number crunchers will appreciate the comprehensive range of advanced functions.

4- Google Sheets: With Google Sheets, you can create, edit, and collaborate wherever you are. For free. Price:
Free for non-business use
$5/month per user for basic G-Suite
$10/month per user for business license

5- Excel: Well it is Microsoft Excel….Enough said. Excel provides a simple way to download financial data into a preconfigured spreadsheet at the click of a button.

6- Money Manager Ex

Money Manager Ex is a free, open-source, cross-platform, easy-to-use personal finance software. It primarily helps organize one’s finances and keeps track of where, when and how the money goes. It is also a great tool to get a bird’s eye view of your financial worth.

Money Manager includes all the basic features that 90% of users would want to see in a personal finance application. The design goals are to concentrate on simplicity and user-friendliness – something one can use everyday.


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7- Xero: Xero backs up your data and protects it with multiple layers of security including industry-standard data encryption and secure data centres. We also offer two-step authentication as an additional layer of protection for your Xero account.

8- Smartsheet Smartsheet is a Software-as-a-Service (SaaS) company focused entirely on its core cloud-based work automation platform. Their competency is in simplifying tasks and including many diverse types of output. Since all their efforts revolve around a single product and its extensions, there is strong user support. 

Resources:

1- Quora

2- Top 20 budgeting financial solutions

Top 10 Financial Tips for Young Adults in USA and Canada

IT Engineering Finance Login

This blog is geared towards young adults, particularly young first and second generation immigrants like me who don’t have any real estate and assets inherited from their parents here in Canada and USA. In this blog, I will help answer the following questions below based on my own experience and extensive research:

I- What are some financial tips for middle class people? What is the best financial advice for middle age people?

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  • Work Hard first and foremost and do well at your job. If you are not working hard at your job, you will lose it and any advice below won’t matter.
  • Live a healthy lifestyle. Your health is your most important asset: Any advice below will be useless if you don’t eat healthy, exercise and have a stress free life. Get medical insurance and get a health check up done once every year
  • Live within your mean; within your budget; Don’t spend more than you earn.
  • Use your credit cards, but always pay them off at the end of the month.
  • Never miss a credit card payment: It will affect your credit negatively and cost you money.
  • Don’t buy a car unless you really really need one. If you do need a car, don’t buy old cars; You will end up spending more in the long run. Buy new cars at bargain price.
  • Take public transit or bike to work: You will save money and exercise and read a lot in the process.
  • Rent empty rooms in your apartment or house, and use that rental income to pay off your mortgage.
  • Get a side job in an area you are passionate about: If you like team sports, you can become a referee or coach and make extra money. You can help people fix their web site if you are tech savvy; You can buy and sell used items on facebook marketplace or kijiji or craigslist for a profit; you can be a tutor on week ends or evenings, etc…
  • After paying all your student loans and more importantly your credit cards debts, save money every single month automatically in your TFSA, RRSP , Roth IRA, 401K accounts.
  • Negotiate everything involving money coming in and out of your pocket. There are no rules set in stone about interest rates or pay grade; Negotiate, Research, Negotiate again until you get the best value for anything you are buying. Don’t be a jerk though and don’t come across as cheap: Learn when to stop and accept and appreciate a good value.

II- How do I improve my personal finances?

  • Work hard. The harder you work, the more likely you are to become financially independent. 
  • Diversify your income. You should never rely on one source of income, you should try and diversify your income streams. On top of your monthly salary at your main job, try to get rental income by renting empty rooms in your house or apartment. Get a side job in an area you have some expertise. Example: Tutoring, Team sport referee, Dance instructor, Handyman, Cleaner, salesman, etc…
  • Cancel recurring paying for things you don’t need (Netflix, Spotify, cable, etc…) ; They add up.
  • Save as much as possible into your TFSA and RRSP, Roth IRA Account and let them compound.
  • Don’t stress too much about anything, particularly finances; Stress is harmful.
  • Have self control: Resist the temptation of buying things that you don’t need.
  • Start investing early and focus on compounding. Always think about long term. Have your money earn money.
  • Read, read and read: Education will help you make and save a lot of money.
  • Exercise and invest on your health which is your most important asset.

III- What should I invest in as a 18-45 year old?  How do I become financially stable in my 20’s?

  • As soon as you get paid, transfer at least $100 automatically to your TFSA, or Roth IRA Account every month. Select an aggressive portfolio and forget it. You will likely get a big return after 10 years.
  • If you can afford a 5% down payment for a house, buy one and if you are still single, rent the empty rooms and make sure that your rental income can cover at least half of your mortgage payment.
  • If you have time to research about stocks market, do your due diligence and buy some good stocks. Don’t invest more than $10000 on stocks from your own pocket. Invest in stocks as if it is lost money and you might be lucky down the road.
  • Start saving money monthly in your RRSP, 401K and RESP accounts if you have kids.
  • Invest in your physical, mental and emotional health: Yes I am repeating myself. If you are not healthy, any other advice is useless and you might not even be around to enjoy the benefits of your investments.

IV- What is a financial rule you should never break? What personal finance mistakes should everyone avoid?

  • Easy to say, but hard to do: Never buy depreciating assets on credit. Cars, RVs, appliances, clothes, trips, leasing, etc. You won’t get rich that way.
  • If you’ve ever thought about buying a house, you’ve probably heard it: Don’t take out a mortgage until you’ve saved up at least 20 percent for a down payment. Otherwise, you’ll be forced to pay notorious private mortgage insurance.
  • Save 10 percent of your income.
  • Don’t rent or throw away money. Buy a house and be the landlord.
  • Investing before spending rather than investing after spending.
  • Pay all your bills and dues in time so as to never pay them with heavy interest or penalty!
  • Don’t invest in anything that you don’t understand. Yourself. Not because someone sold it to you or because others are doing it.
  • Don’t focus on the short-term, allow yourself to be unduly influenced by the financial news media, or let news about the market or the economy affect your long-term investing strategy.
  • Save and Invest early and aggressively in your 20’s. Time and a higher risk tolerance are extraordinarily valuable and everyone can make this call when they are younger—or do so for their children/family. This also sort of falls under the “rule” of paying yourself first. This is key to maximizing wealth.

V- How can you attain financial freedom by working 9 to 5 job?


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  • Read , read, read and be curious. This will help you find and execute ideas to make some money on the side.
  • Increase your income streams: On top of your day job, try freelancing on the side for a few extra bucks. Identify where you can provide your freelancing services (Referee in team sports, Handyman, Tutor, Buy and Sell used items for a profit, art, etc..). The more sources you have, the better.
  • Start saving as early as you can.  The earlier you start, the better.
  • Make your money work. Start a business, make investments, do something that makes you more money from what you have.
  • Make money from your existing assets (rent rooms in yours house, Uber or deliver stuffs with your car or truck, etc..)
  • Never spend money on depreciating commodities that doesn’t affect your safety. What you can do with a  used $200 phone, doesn’t have to be bought at $1000 just because it is hip.
  • Don’t jeopardize your safety. If you buy old cars that  break down regularly and put you at risk on highway, all the advice above won’t matter.

VI- What is the best way to invest in real estate?

  • Whatever you are buying, put at least 20% down to avoid paying extra insurance fees and be stuck with a high interest rate for years.
  • Buy in decent neighbourhood.  It usually means better tenants who will be more likely to  pay their rents and not damage the property.
  • Buy a mix of multi family and single family homes.  It usually results in better tenants and higher equity growth over time.
  • Invest on home inspection: Make sure to use an agent who is able to point out potential problems.  Get a home inspection and don’t buy a property that requires extensive repair.  Especially on your first one and when you don’t have a ton of disposable income.
  • Build: Contact builder who build properties and buy from them, allowing you to get great discount and customize the house for extra rooms and developed basement. 
  • Become Part of a Bigger Deal:  By partnering up with others interested in investing and pooling your resources to make a larger deal happen. Do some research online on how you can do this for either a commercial or residential property, which in some cases, requires an investment as small as $1000. The good thing about these deals is that you can hedge your bets by placing multiple investments into various properties.
  • Real Estate Investment Trust: Also known as a REIT, you can invest in a publicly traded trust that uses the capital of its investors to acquire and operate properties. You can find REITs in the major Wall Street exchanges and it requires companies to shell out 90% of their taxable profits through dividends to investors in order to retain their position as an REIT.
  • Rent A Portion Of Your Existing Home via Airbnb or VRBO: I prefer those options because you it is short term and you can always stop renting when you have family visiting. This gives you a lot of flexibility.

VII- Is it worth taking out a loan to pay for a house?

  Year 1 Year 10
Time to Sell
John Doe 1
Buys 1 house cash putting 20K down and invest 80K
Gets $800 per month from the $80K savings
easy life and always has plenty of cash
$96,000 in rental income
sells his one house for $200,000 and nets $100,000, so his total gain was $196,000, not bad. His $100,000 investment has nearly tripled!
John Doe 2
Borrows and Buys 4 houses with 100K putting down 20K for each
Gets $200 per house per month but spends it all towards the principal of the loan, so gets $0 per month
Must keep his full time job and has a struggle keeping up with expenses
around $24,000 in rental income
sells his 4 rentals for $200,000 each netting $100,000 each for a gain of $400,000, so his total gain is $424,000, so his investment has more than quadrupled!

Who won?

VIII-  What are some rookie mistakes of first-time house buyers?

  • Rushing to accept any financing offer because of the excitement to own your first house: Not good. Get various and competitive financing offer from different institutions and negotiate to get the lowest possible interest rate.
  • Don’t just focus on the aesthetic part of the house; Most first houses are never your dream house:  Focus on features that will make the house  easily and quickly sellable (Number of rooms, size of rooms, garage, easy to maintain, location, etc..).
  • Don’t buy an above average size and price house for your first house, go to the lower end and get a size that is proportional to your family size.
  • Using a family or friend for a realtor: Don’t do it. This is your first most important investment and don’t mix it with feelings and emotions.
  • Location, location, location: Buy where you can easily access public transit so you don’t have to spend all your savings on driving to work. In the same token, buying closer to public transit will help you get renters easily if you have empty rooms available.
  • Inspection, inspection, inspection: Get the best home inspector available. Some of them are really bad. Look for home inspectors reviews before hiring them. If the home inspection misses important defective stuffs like dry rot on the siding, you will end up spending thousands of dollars to fix them.

IX- What’s a realistic down payment percentage for a first-time home buyer?

  • As a buyer, if you have  enough money for a 20% down payment and closing costs and has something left over for cash reserves, 20% is fine. But if you carry any consumer debt with rates higher than that of a mortgage, it is far better to pay those more expensive items off with available cash than to put it into a home down payment.
  • When you get a conventional mortgage with a down payment of less than 20 percent, you have to get private mortgage insurance, or PMI. The monthly cost of PMI varies, depending on your credit score, the size of the down payment and the loan amount. 

X- Resources & Definitions:

1- Quora

2- CRA

3- What is RRSP: An RRSP is a retirement savings plan that you establish, that we register, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax. Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan; you generally have to pay tax when you receive payments from the plan. (Applies to USCanadaonly)

4- What is TFSA: The Tax-Free Savings Account (TFSA) program began in 2009. It is a way for individuals who are 18 and older and who have a valid social insurance number to set money aside tax-free throughout their lifetime. Contributions to a TFSA are not deductible for income tax purposes. Any amount contributed as well as any income earned in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn.  Administrative or other fees in relation to TFSA and any interest or money borrowed to contribute to a TFSA are not deductible. (Applies to Canada only)

5- What is RESP: A registered education savings plan (RESP) is a contract between an individual (the subscriber) and a person or organization (the promoter). Under the contract, the subscriber names one or more beneficiaries (the future student(s)) and agrees to make contributions for them, and the promoter agrees to pay educational assistance payments (EAPs) to the beneficiaries. (Applies to Canada only)

There are two different types of RESP available: family plans and specified plans.

6- What is Roth IRA? A Roth IRA is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA. (Applies to USA only)

  • You cannot deduct contributions to a Roth IRA.
  • If you satisfy the requirements, qualified distributions are tax-free.
  • You can make contributions to your Roth IRA after you reach age 70 ½.
  • You can leave amounts in your Roth IRA as long as you live.
  • The account or annuity must be designated as a Roth IRA when it is set up.

The same combined contribution limit applies to all of your Roth and traditional IRAs. 

A traditional IRA is a way to save for retirement that gives you tax advantages (USA)

  • Contributions you make to a traditional IRA may be fully or partially deductible, depending on your circumstances, and
     
  • Generally, amounts in your traditional IRA (including earnings and gains) are not taxed until distributed.

7- 401K: A 401(k) is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts.

  • Elective salary deferrals are excluded from the employee’s taxable income (except for designated Roth deferrals).
  • Employers can contribute to employees’ accounts.
  • Distributions, including earnings, are includible in taxable income at retirement (except for qualified distributions of designated Roth accounts).