self-employedWhen you are working toward the goal of trading for a living, you are probably spending most of your time and energy developing the art of trading itself and everything that goes with it—building up a trading system, learning how to have enough discipline to follow through with your trading rules and decisions, and learning how to manage your money conservatively and effectively. Less time will be spent finding where you are trading, assuming you have already found the USA binary options brokers and chosen from them, assuming you are from the U.S, of course.

You might not be spending as much time thinking about the other major changes in your life which will come about if you quit your current job and start trading for a living full time. If you’re already self-employed in some other occupation, you will not have quite as big a transition. But if you are currently an employee at some other company, then you will not only be adjusting to trading for a living, but also to being self-employed for the first time.

There are a number of advantages and disadvantages that come with self-employment. Think about the things that annoy you in your current job that you won’t have to deal with when you are self-employed, and you’ll have an idea for how you’ll benefit. Consider the conveniences that come with employment, though, and you’ll realize just how many drawbacks there are when you go out on your own. There are a lot of things your employer takes care of so you don’t have to. It’s great not having someone else managing your every move, but don’t think that means you can make a living without being managed. The difference is that you have to learn to manage yourself.

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Learn To Manage Yourself

There are a couple of different aspects of managing yourself. Mostly these come down to time and money, which are two sides of the same coin (pun intended). We have all heard the phrase that “time is money.” Nowhere is that more true than with self-employment. Self-employed people do not generally pay themselves by the hour; they pay themselves according to productivity. Furthermore, as a binary options trader, you cannot expect to be paid by the hour, because you will not be making your money on such a regular schedule. The market does not care if you have an hourly income goal. It does what it does, and it is your job to make the most of it. Managing your time allows you to get the most out of the market without burning out.

Managing your money is something you’ve already been practicing while you’ve been testing or trading live (more on bankroll management here), but what about managing the rest of your finances while you’re not at work? The salary your employer pays you is the salary you’re paid; you don’t get a say in it. But you have more control over how much or little money you make when you are self-employed, which means you are responsible for meeting all your budgeting needs, including some you may not be worrying about right now if you’re employed (like healthcare).

Managing Your Money: What You Need to Budget

There are a number of life expenses you need to be able to afford when you go out on your own. Some of these you are used to taking care of, but you need to make sure you don’t forget to budget them since you are now 100% responsible for your financial situation. Here are the expenses you are familiar with now:

• Rent/mortgage. Don’t forget all associated fees and costs, like your home insurance if you have it.

• Food. You may not put that much thought into how much you pay to eat each day, but you will probably want to calculate a specific budget for yourself and your family and make sure you stick with it.

• Gasoline and other transportation-related costs.

• Miscellaneous monthly costs which you may have like storage fees, school loans, old medical bills, and so on.

There are also some expenses you may have to deal with that you may not be used to budgeting. When you are employed, your employer sets aside money for your health insurance and your taxes. But when you are self-employed, you have to deal with both of those expenses yourself. It’s also up to you to think about your future.

• Health insurance. You’ll need to buy a health insurance plan for yourself. Unfortunately right now they are rather more expensive than the one your employer helps you out with. When Obamacare kicks in, health insurance should become more affordable if you are self-employed.

• Other health-related expenses. No insurance plan covers everything. If you require some kind of alternative care, you will have to separately budget it since your insurance plan probably won’t pay for it. Also consider the cost of supplements and other health supplies you need every month.

• Taxes. Taxes are pretty high for anyone who operates a business, but for self-employed traders they are even higher than they are for most. In most countries, trading is treated as if it were gambling, which means that you’ll be paying a very large percentage of your income straight to the government. In some cases, traders forget about this when they are setting up their trading plan. If you’re in the testing phase, recalculate your potential profits after taxes, and you may well discover that when you trade live, you will not be making half as much. If you’re already trading live, you are already paying taxes, and thus you already realize just how much you will need to profit in order to make a living off of your trading. Just don’t forget to calculate it as part of your whole budget.

• Savings. Breaking even isn’t the worst thing in life; it’s certainly better than losing money. But saving money is much better. You want to be putting aside money every month for future use. Think of it as your retirement fund. Do some math and figure out how much you need to set aside each month to meet your retirement goals. If you won’t be making enough, you may want to keep working on your trading plan until you are ready.

• Miscellaneous supplies. Budget money each month for household and bathroom-related supplies.

• Entertainment and other expenses. Set aside money for entertainment and other miscellaneous expenses each month.

And then there are emergency expenses. It is best to budget these as a separate category. You don’t want to be pulling money away from standard monthly expenses to pay for emergencies, but you also don’t want to pull out of your savings. The goal of savings is to build up resources for the future which you can one day use on things you want and need—not to keep pouring them into emergencies. So you should plan a separate budget for things that can go wrong. Your employer isn’t going to be there to pay you an advance or give you time off in case of an emergency. Some of these include:

• Emergency medical expenses. Your health insurance probably won’t cover everything. You need to have money set aside for unexpected out of pocket costs, not to mention forced time off.

• Emergency travel expenses. What if a member of your family needs help or you need to attend a funeral? It is good to have money set aside for family and travel-related emergencies.

• Emergency vehicle repair expenses. If you own a vehicle or vehicles, they are going to regularly require maintenance and repairs. Trying to deal with these expenses out of the blue with no money set aside for them can be quite trying, so you probably should have a fund specifically set aside for this purpose.

Managing Your Time: Getting the Most Out of the Market

Just as your employer took care of your taxes and health insurance and some other aspects of your financial situation, your employer also told you what to do and when to do it. That isn’t going to happen anymore when you trade full time for a living. On one hand, that’s great—you get to go where you want, when you want, and set your own schedule. That kind of freedom is in many ways priceless. But if you aren’t good at telling yourself to work or you fail to set limits, you will pay for it financially and emotionally.

Managing your time is ideally about finding a perfect balance. You should already have some experience with this since you will trade live for a while before you start trading fulltime. And in some ways, it will get easier, because you will no longer be trying to balance trading commitments with work commitments. And you will already be used to dealing with the financial pressures of trading—to an extent. But you will no longer have a safety net, and with no other source of income, you will feel a lot more pressure to trade well. After all, your life (and your family, if you have one) depends on it.

Want to learn how to balance life and trading before you go “full-time”? Find out how here

There are two main dangers faced by self-employed people who are managing their time on their own for the first time ever. The first is poor discipline and follow-through. Some people just can’t do anything without someone else telling them to do it, how, and when. The other is the opposite, but it can be just as detrimental, and that’s the inability to stop working. Workaholism may be treated like a joke, but it truly is an addictive behavior, and it can destroy a person’s life. Workaholic behavior often results from the feelings of extreme pressure which come out of knowing that you are now 100% reliant upon yourself for your income. You may feel like you are obligated to work all the time in order to make ends meet.

For binary options traders, these two problems take the form of under-trading and over-trading. If you under-trade, you miss opportunities because you aren’t at your computer at the right time, or because you simply are too lazy to trade on a particular day, or you forget to check the markets. If you over-trade, you may find yourself constantly at your computer when you should be sleeping, getting exercise, spending time with friends or family, or doing some other activity. You may trade at all hours of the night or day, forsaking your physical and mental health, terrified of missing a single good trade.

The danger of under-trading is of course that you won’t make any money because you aren’t trying. The danger of over-trading is just as real, though, and that’s that you will burn out or start making foolish trading decisions because your judgment is compromised and your mental health is no longer in balance. You also may harm others in your life by becoming inattentive, impatient, and anxious.

Strike a Balance for Success

There are several reasons that traders fail when they strike out on their own and trade full-time, and those reasons often have nothing to do with their trading methodology (which is already well tested when they decide to trade full time). Not budgeting your money and managing your life finances properly can run you broke, and not living a balanced life where you properly manage your time can lead you into a physical and emotional deficit, one which will eventually reflect in your account balance as well.

Find a balance and learn how to manage your money and time and you will greatly increase your chances of success as a self-employed binary options trader.

Use the references below to get your trading on track: