If you’ve ever gambled, you probably have set a stop-loss order. You tell yourself something like, “Alright, if it’s not my night tonight, I will only allow myself to lose $100.” Therefore, once the $100 is gone, you’re done.
Another example, is when you go to a bar and only bring about $20 in cash and your I.D. This way, the credit card isn’t coming out at 2:30 right before the bar is about to close.
This is a pretty simple concept taken from the stock market. In investing, you place a stop loss order to protect your gain or minimize your loss. For example, you bought a stock for $20 and now the price is $30. To protect your gain, you can place a stop-loss order at $30. Therefore, if the price of the stock declines to $30, a market order is place and your stock would be sold.
This post isn’t about placing a stop-loss order on a stock, it’s about using this concept in your life.
Placing Stop Loss Orders in Life
Let’s say you want to take some time off to travel. However, in the back of your head you feel you don’t have enough money.
Instead of worrying about not having enough, place a stop loss order. If you saved $10,000 to travel, set your stop-loss order to return home when you have $3,000 left. This should be plenty of money to get you home and on your feet in little time.
There’s no limit to the amount of stop-loss orders you can set. Let’s say you want to start your own business. You have saved $10,000, which you think will last 6 about six months.
Place a stop loss order to get a part-time job, when your savings reaches say $4,000. Place a second stop loss order, to return to work full-time, at $2,000 of savings.
This simple strategy, can reduce a lot of the financial worries you might have when you’re making big decisions in life. It has worked great for small decisions, why not extend it to the big ones?
What other areas of your life can or have you used this concept? Has it worked?