Financial Foundation - Why Is It Important

Why is having financial foundation important? And by this, I don’t mean the money you have in your emergency account. I mean your foundation as in your knowledge in financial matters. Let me digress a little.

I’m participating in a challenge online. It is a free course teaching people how to earn their first $10 within 30 days. Something happened and one of the services which our mentor recommended used shut us out. Many beginners panicked and the forums post got very long. There were efforts to calm everybody down. Those who had a little more experience weren’t fazed at all. Because they know, there are alternatives!

This story sounds familiar to the recent subprime meltdown right. Many people were predicting another Sept 11 type or 1997 stock crash. Whether it happens or not, time will tell. The important thing is, do you know what you are going to do?

Many seasoned investors have a strategy that they stick to. A simple example is to sell if the market drops below a certain percentage and then pick up stocks again when the market has bottomed out. The strategy is only important if you follow it and implement it. Many people have a strategy but make allowance for it. In the above example, even when the market has fallen to the cut off point, they still keep invested, going against their strategy.

A person with a strong financial foundation (knowledge wise) will follow strictly to that strategy in the long term. The knowledge they have allows them to choose alternative ways. For instance, they keep invested perhaps in other instruments when one is not doing well. What they won’t do is panic and hide the money in save FD’s. So at what level is your financial foundation?

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