In the diverse and challenging world of the foreign exchange, there is an investment method commonly referred to as "forex news trading." Encouraging traders to rely on news releases and economic data trends, it is an exceptionally popular method, as global events are often a catalyst for short-term movements in the financial market.

Ordinary investors may well want to employ the same methods used by forex traders glued to their trading screens. If individuals in the U.S. want to take strict control of their finances and avoid the issues posed by long-term cyclical debt, for example, they may need to follow economic news trends and learn how to use them in the quest to both save and make money. With nearly real-time news now available over the internet, it's simple to follow fluctuations in regularly released data.

Inflation and Unemployment: The Key Consumer Economic Date Trends

In terms of understanding economic data trends and using them to your advantage, inflation and unemployment represent two of the most important economic factors, as they highlight the general cost of living and the status of the constantly evolving labor market. While inflation is defined as a general increase in prices and a fall in the purchasing value of money, for example, labor market statistics can reveal the national rate of employment and the financial prospects for job seekers throughout the country.

When it comes to managing your finances, it is important to be proactive and understand how these factors work in tandem with one another. If you take the current economic situation in the U.S., for example, you will see that the cost of living climbed steadily for three months between May and July. While the unemployment rate has also fallen to just 7.4% during this time, economists have suggested that this rate of job growth has been distorted by the creation of part-time work in low-wage industries. This has forced White House policymakers to monitor the sustained rise in inflation carefully, as a situation where the cost of living continues to rise disproportionately to the national wage could cause a significant downturn in the economic fortunes of U.S. residents.

As a homeowner or consumer you may need to monitor these trends. Regardless of whether or not you have a job, it is crucial to budget your income and determine how much disposable cash you have available each month. Use resources such as the U.S. Inflation Calculator to view monthly rates and identify any prominent trends. In instances where inflation is rising out of proportion to your level of disposable income, you could choose to adopt a more conservative approach to spending and borrowing.

Interest Rates: Diminishing Debt and Irresponsible Borrowing

On a similar note, consumers who are looking to manage their finances must understand the nature and importance of interest rates. As consumer confidence soared between March and June, borrowing also increased heavily in the real estate and automotive markets. Auto lending in particular increased by $20 billion during the second financial quarter and this represented the single biggest gain in more than seven years. While government-backed low interest rates have been at the heart of this increased rate of borrowing, economists have already warned that the current scenario may create instability and trigger long-term inflation.

As a consumer, you must remember that low interest rates are often contrived by governments that wish to reduce the cost of secured lending and encourage a greater level of reinvestment into the economy. While this is a standard economic practice, the prime interest rate at which you borrow is subject to change and subsequently have an impact on the long-term value of your investments. It is therefore your responsibility to invest and spend cautiously, as a failure to appreciate the fluctuating nature of interest rates and their vulnerability to government manipulation could ultimately lead you to spend outside of your means.

As the recent economic decline has shown, governments tend to adopt extreme fiscal measures during periods of recovery. While the Fed has reduced interest rates in a bid to encourage consumer spending, this doesn't mean you should splurge on a new car or justify some other extravagant debt. It is crucial that you resist the urge to overspend when interest rates fall, and instead make purchasing decisions based solely on your disposable income levels, existing debt liability and the long-term value of any potential investment. In short, low interest rates need to be seen as an opportunity to get ahead on your bills, not to take on more payments.

The Bottom Line

While there is a world of difference between investing in the forex market and buying monthly groceries, the fundamental goals of achieving value for your money and establishing a healthy return remain unchanged. Just as a trader can use economic data trends to evaluate his or her investment options and make a responsible decision, consumers can also apply their understanding of inflation, interest rates and the labor market to determine their spending outlook and successfully manage their personal finances.

Related Articles
  1. Professionals

    Career Advice: Financial Analyst Vs. Research Analyst

    Read an in-depth comparison between a career as a financial analyst and a career as a research analyst, including which one to choose.
  2. Budgeting

    Financial Risks That Don't Pay Off: The Cost Of Reckless Financial Behavior

    Despite the recessions, citizens continue to take financial risks and spend outside of their means without fully appreciating the potential consequences for both themselves and the wider economy.
  3. Budgeting

    Tax Holidays For Back-To-School Shopping 2013

    Find out the types of back-to-school purchases that are exempt from sales tax for each state that is holding a tax holiday.
  4. Budgeting

    How To Match Your Savings Goal With Investments

    Sometimes beginning investors forget the trick to success when it comes to investing money: you need to match your future financial goals to the right kind of investment.
  5. Budgeting

    8 Clear-Cut Ways To Becoming A Better Saver

    These sure-fire budgeting tips will boost your savings quickly. The only trick is setting aside your excuses are getting started!
  6. Savings

    Don't Sacrifice Saving Just For The Economy

    Consumers should think twice before they sacrifice their saving habits for a faster-growing economy.
  7. Options & Futures

    10 Simple Steps To Financial Security Before 30

    Find out how to reach your long-term goals without becoming a tightwad.
  8. Investing

    The Science of Making Better Investment Decisions

    Neuroeconomics attempts to bridge neuroscience, cognitive psychology and economics in order to understand the mechanisms underlying economic decision making.
  9. Stock Analysis

    If You Had Invested Right After Gilead's IPO

    Find out the present day value of your investment in Gilead Sciences and the amount of shares you would own if you had invested during its IPO.
  10. Stock Analysis

    If You Had Invested Right After Costco's IPO

    Find out how much your investment would be worth if you had invested $1,000 during Costco's IPO and how much you would have received in dividends.
  1. Is Israel a developed country?

    Israel is considered a developed country, although it has substantial poverty and large income gaps. The International Monetary ... Read Full Answer >>
  2. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
  3. Do financial advisors charge VATs?

    The Personal Finance Society (PFS) and with Her Majesty's Revenue and Customs (HMRC) have outlined when a value-added tax ... Read Full Answer >>
  4. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>
  5. Are UTMA accounts escheatable?

    Like most financial assets held by institutions such as banks and investment firms, UTMA accounts can be escheated by state ... Read Full Answer >>
  6. What are the dormancy and escheatment rules for stock accounts?

    While the specific dormancy and escheatment rules for stock accounts vary by state, all states provide for the escheatment ... Read Full Answer >>

You May Also Like

Trading Center