Many people find they are spending more than they bring in. It's difficult to increase your net worth in order to meet your financial goals, if you are constantly falling behind on income front.

Most causes of overspending can be resolved through use of a budget. By setting up an annual budget can help you prioritize and limit your expenses and in same time uncover ways to free up more money to use for savings and investments.

Above all, remember that arriving at a workable financial strategy is a negotiation process. It's very healthy to admit who you are when it comes to money! Too often people try to give up who they are and it backfires.

You need to know what you can't give up, as well as what you wouldn't mind giving up.

You'll also see how bad things can be if you don't use it.

You, Successful Investor

In business and in stock market, you've got to have a plan, and you've got to have an exit strategy. At The Oxford Club, we know in advance exactly when we're going to buy and sell. Our strategy allows us to ride our winners all way up, while minimizing damage our losers can do. Before I get into our specific strategy, consider this business example.

Let's say you're in T-shirt business. You've made a ton of money on your T-shirt business in states, and you're now in The Bahamas looking for new opportunities. You size up market, and you figure you can make money in two places: in golf shirts, geared at businessman, and in "muscle-tees," geared toward vacationing beach-goers. These are two products clearly aimed at two different markets.

You invest $100,000 in each of these businesses. At end of first year, your golf shirts are already showing a profit of $20,000. But muscle-tees haven't caught on yet, and you've got a loss of $20,000. There are numerous reasons why this is possible, so you make some changes in your designs and marketing and continue for another year.

But in second year same thing happens–you make another $20,000 on your golf shirts, and you lose another $20,000 on your muscle-tees.

Now let's say you're ready to invest another $100,000 in one of these businesses. Which one business do you put your money into?

The answer is obvious. You, as a business owner, put more money toward your successful businesses. But as you'll see, this is opposite of what 99% of individual investors in America do.

You, Successful Stock Market Picker

What does "owning shares of stock" actually mean? This isn't a trick question–as you know, it means you're a partial owner of company, just like you're owner of t-shirt company in example. Owning your own business isn't any different than owning a share of a business through stock.

Let's say shares of your two shirt companies trade on stock exchange. They both start trading at $10 a share. At end of first year, profitable golf-shirt company is trading for $12 a share, and unprofitable muscle-shirt company is trading for $8 a share. At end of second year, golf shirt company is trading at $14 while muscle-shirt company is trading at $6 a share. Which shares would you rather own?

Even though you know you should buy winning concept in this business example, most investors don't do so in their stock investments. They keep throwing good money after bad hoping for a turnaround. They buy "cheap" stock–the loser.

The Trailing Stop Strategy

In stock market, you must have a strategy that makes you methodically cut your losses and let your winners ride. If you follow this rule, you have best chance of outperforming markets. If you don't, your retirement is in trouble.

Our plan is to ride our stocks as high as we can, but if they head for a crash, we have our exit strategy in place to protect us from damage. Though we have many levels of defense and many reasons we could sell a stock, if our reasons don't appear before crash, Trailing Stop Strategy is our last-ditch measure to save our hard-earned dollars. And, as you'll see, it works well.

The main element to The Oxford Club's trailing stop strategy is a 25% rule. We will sell positions at 25% off their highs. For example, if we buy a stock at $50, and it rises to $100, when do we sell it? When it falls back to $75, or 25% off our high.

So with our Trailing Stop Strategy, when would we have gotten out of muscle-shirt business? You already know answer. Remember shares started at $10 and fell immediately. Instead of waiting around until they fell to $6 as business faltered, using your 25% trailing stop, you would have sold out at $7.50. And think of it this way–if shares fall to $8, you're only asking for a 25% gain to get back to where they started. But if shares fell to $5, you're asking for a dog of a stock to rise 100%. This only happens once in a blue moon–not good odds!

Advice on When to Buy Stock

Have you ever seen Coke or Microsoft selling at a single-digit P/E ratio? Me neither. And these aren't isolated cases. The fact is, by hoping to buy super-cheap, you would have missed out on many of greatest investment opportunities of our time. To make big bucks in best investments you'll have to forget "buy low, sell high." The new Oxford Club investment rule is "buy momentum, sell higher."

We like to buy companies on way up. It usually means company is doing something right. It's equivalent to your golf- shirt business in The Bahamas. Let me explain.

Let's say that you and I believe in idea of a three- wheeled car, and price of stock in company that manufacturers them is at $30... but falling. When do we invest? At $30? $20? $10? $5? We don't know how far this thing will fall. We want to buy when there's some inkling of a market confirmation of our idea.

There is no price that's right price. Take $10 for example. I'd be a buyer at $10 if our three-wheeled car had fallen to $5 first, and then stock started to take off because Ford was going to take it over. But I'm not a buyer at $10 if it's one stop on way down–the last stop on that elevator could be basement. The bottom line is this: I don't want to buy dreams alone–I want to buy dreams that are turning corner to reality.

We've got a complete buy and sell strategy for all–every single one–of our stock positions.

Here's How Our Trailing Stop Strategy Works

(See Part 2 and 3 of this white paper by searching this web site by Author's Name for ‘Steve Sjuggerud.’)