Module 2: Understanding Your Financial Flexibility

Your financial flexibility plays a crucial role in determining how much risk you can comfortably take on. In simple terms, financial flexibility is your ability to handle financial losses or market fluctuations without compromising your essential obligations. Understanding this is key to making decisions that align with your personal financial situation. 

For example, if you have a stable, high income along with significant savings, you may be in a better position to take on higher-risk investments, such as CFDs or stocks, because you have a financial cushion to fall back on. On the other hand, if your savings are more limited or you have regular financial commitments, you might want to approach risk with more caution and consider safer investments. 

Liquidity: What It Means for You 

A key concept to understand is liquidity, which refers to how quickly you can access cash from your assets. Let’s break it down: 

Dependents and Regular Obligations 

Another important factor to consider is your dependents and regular financial obligations, like paying off a mortgage or supporting children. These obligations can reduce your financial flexibility and influence your ability to take on risk. If you have higher obligations, you may have less room for taking on high-risk investments like CFDs. 

Understanding how your financial situation, liquidity, and obligations impact your financial flexibility will help you assess the level of risk that’s suitable for you. 

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