You’re probably wondering why you need money rules? To be honest, a lot of people ask me how I handle money and I always tell them that I follow certain rules. They provide structure, guidance, and help in making me more disciplined especially when it comes to money management.
But let me tell you the truth. Learning the right way of managing money is a skill that you need to develop gradually. It won’t happen overnight. You need time, patience, perseverance, and commitment. Practice these rules as often as you can and they will eventually become part of your life and help you handle your finances better.
In this blog, I’ll share the 45 money rules that I live by. Stay with me until the end and you’ll receive 5 free tips. So, let’s get started.
Invest in assets
Owning assets is a good investment that will generate income over time even if you’re old or sick. Your assets make up a huge portion of your net worth. Investing in them helps you achieve financial independence, which means you’ll have enough income to fund your daily living expenses throughout your life.
Invest your money
Increased earnings mean increased expenses. You need to learn how to budget so you can spend your money to invest. Keep a small budget and invest the rest of your money. You’re probably wondering why you should invest instead of saving. The answer is simple, investing lets your money grow faster than it could when you keep your cash in a savings account. Your returns compound over time, which results in a higher rate of ROI and investment earnings.
Manage your money until you’re old
There’s no time limit as to when you can manage your money. You’ll have to do that until you’re old unless you suffer from a cognitive impairment that prevents you from doing so.
Overspending is not an answer to insecurities
Insecurities will drain your bank account. Improve your social skills and improve your self-confidence. Don’t overspend just because you want to cover your insecurities. You’ll only end up wasting money and it won’t do anything to boost your self-esteem.
Don’t let anyone know that you have money
There’s no reason why you should tell others that you have money or how much you have unless it is directly related to a business transaction or when you’re making an investment. It may draw unwanted attention from others.
The greatest wealth transfers happen during a crisis
Crisis often triggers wealth transfers. The coronavirus pandemic will cause the greatest wealth transfer in history and experts say it’ll happen within three years. The population will be divided into three groups. One group will experience the most impact from the pandemic. The second group will manage to maintain their lifestyle before the pandemic while the last group will become richer. You need to know how to look for opportunities to be part of the third group.
As you get older, your expenses will grow
Your expenses may increase as you get older. When you’re single, you don’t have to worry about anyone else. You just have to take care of yourself. This will change once you get married because you’ll have a family to support. Once you retire, your expenses may decrease because your kids have a life of their own at that point. But if you have medical issues, you’ll probably be spending more on health care costs.
Wealth accumulates over time
Accumulating wealth doesn’t happen overnight. It takes time if you want to do it successfully. In a report by Business Insider, it takes 32 years to become a self-made millionaire. So, don’t pressure yourself by asking when you’ll catch a break. Always remember that growth over time is essential. It’s also wrong to believe that millionaires were born into wealth. More than 78% of them either came from the middle class or the poor. So, just take your time and do it right.
Invest Now and Reap The Benefits Later
“Someone’s sitting in the shade today because someone planted a tree a long time ago” is a quote from Warren Buffett, who’s known as one of the most successful investors of all time. It simply means that if you invest early in your life, which can be compared to planting a tree, then you will be able to build wealth in the future, which is likened to sitting in the shade.
The most important thing to do if you find yourself in a hole is to stop digging
This is one of Warren Buffett’s words of wisdom. It says you should stop digging if you find yourself in a hole. If you made a wrong decision when investing, you have to stop throwing money at it. You may find it difficult to pull out because of all the cash you’ve put in. However, you’ll realize later on that putting an end to it will take the burden off your finances.
The worst investment you can have is cash
Warren Buffett warns investors to never keep a hoard of cash in their investment portfolio. Some people believe that cash is king and that’s why it’s their preferred long term investment option. But that’s not true. Buffett said that the value of cash will decrease over time, making it a bad investment.
Speculation is dangerous especially when it looks easy
Speculation involves various methods such as swing trading, pairs trading, using hedging tactics, and identifying the chart patterns. Speculators are individuals who know fundamental analysis and short term movements.
Unfortunately, this option isn’t a good idea if it looks easy. Regardless of the methods used for speculation, it must only be a small part of your investment portfolio. If you decide to participate, there are a few things you need to do first. You should pay off your debt, start a college fund, and build your retirement account.
If you purchase things you don’t need now, you will only end up selling the things you need in the future
This is another quote from Warren Buffett. Many people accumulate things they don’t need. When you make a purchase, try to ask yourself, do you really need a new pair of shoes? Do you need to have a new handbag? Do you need a new car? Buying unnecessary stuff is a waste of money. When the time comes that you need cash, you’ll have no savings to turn to. So, your only resort is to sell valuable things you need. You better stop buying things you don’t need if you don’t want to face financial instability in the future.
Don’t just go with the trend and follow what others are doing
Have you heard about someone who followed the strategies of another person and made a fortune? Probably not. That’s one of the main reasons why you should not follow the crowd. Don’t worry about what others are doing, many of them will only settle for the average.
As a matter of fact, if other people are not performing well, then that’s a red flag. You need to stay away from them. Always remember that opportunities tend to come at the least expected time. When people start investing in a certain company, resist the urge to follow them because the chances are, you’ll lose more money compared to the risk if you have a mixed portfolio.
You don’t have to do extraordinary things to achieve great results
You don’t have to do extraordinary things to make a lot of money. It’s only one way of doing it. You can also earn cash by making small choices like saving a few dollars daily and investing them. You may not be like Elon Musk but by making small wise decisions, you can still achieve extraordinary results.
Hope isn’t an investment strategy
When looking for a company to invest in, you should find one that’s stable, has an undervalued stock, and has great potential. Before you invest, you need to understand what the industry is and the business overall. You can’t just hope. You need to know what you’re getting into.
Time holds more value than money
Time is money. The value of money today won’t be the same in the future. Keep in mind that you can use time to make money but you can never use money to purchase time.
Make a profit when the market is at its worst
You will have more opportunities to make money if the market is in a bad condition. This is what contrarian investors believe. This kind of investor goes against the current market trend. They go against the crowd. They invest when the market is in turmoil.
Never let greed destroy you
Greed can cause you to sell stocks that are already on the bottom or purchase stocks at the peak. You’ll eventually end up destroying your portfolio appreciation over time.
Diversification is nonsense
Obviously, you should invest in great companies. But how many stocks do you need to own? Some experts say, it should be as few as possible. As previously mentioned, you need to do your research first before you invest. You need to spend time and resources to go through its financial resources and to create a financial analysis of the company you’re thinking of investing into. Of course, you should never put all your eggs in a single basket. But it’s also not recommended to invest in several companies just because you wish to diversify your portfolio.
Dividends are important
Dividends are important when investing. These are the cash distributions made by companies on a regular basis to stockholders. The dividends reveal a lot of things about the company’s performance and future growth.
You have other options other than the stock market
The stock market isn’t your only investing option. There are other alternatives such as commercial finance, art finance, and real estate finance that also offer returns.
Patience is key
It’s important to be patient when you’re investing. You will spend a lot of time before you can enjoy the benefits. You must also be prepared to endure short term hardship if you want to reap future rewards.
Invest In Companies with Simple & Direct business models
Choose companies with simple business models. Look for businesses that are direct. It’ll be easier for you to determine if the company’s product will remain relevant ten years from now if the company follows a simple and direct business model.
Invest in companies with addictive products
Look for companies that offer addictive products. Investing in a business that provides services or products that customers will buy over and over again.
The brand name matters
Consumers tend to buy from companies that they are familiar with or feel connected to. A well-established brand is easily recognizable. You should consider how powerful the company’s brand name is before investing in it.
Turn good deals into great deals
Debt isn’t as bad as people believe. Let’s say you want to buy a house. If you have a good credit score, you can get a mortgage with a good interest rate. If you have one million dollars, you can invest that money instead of using it to buy the house. If you are a real estate investor, you can use debt to their advantage. Instead of saving money to buy a property, you can use debt to save you time. Once you’ve acquired the property, you can use that as collateral to purchase a new one. Not only that, you can rent it out so you’ll have another source of income.
Take advantage of tax loopholes
Nobody wants to pay taxes. But the tax codes are filled with loopholes that you can use to your advantage. If you know how to identify them, you can use them to pay less in taxes, which means more savings that you can invest.
Achieving your first milestone is always the hardest
It’s difficult to imagine yourself making millions if you’re barely making ends meet today. Even if you work overtime, then you’ll have extra cash. But wealth doesn’t work that way. When you build wealth, the first milestone is always the hardest. But once you get the hang of it, things will become easier. Don’t be discouraged. Focus your efforts first in saving your first $20,000. Once you’ve reached your first goal, things will become much easier down the road.
You can make a fortune with just one opportunity
There’s a fast way to build wealth. But it won’t be easy. Cash is king during a crisis. So if you want to take advantage of the next crisis, what you need to do now is save.
You don’t have to explain your financial goals to others.
There are instances when sharing your financial goals with others isn’t a good idea. Some people may start to argue with you, which could discourage you from pursuing your objectives. Keep your goals to yourself but make sure that they’re rational and realistic. Just continue working in silence and let others see the results.
Follow the 80/20 rule
There are countless ways to make money. Some methods are effective but there are others that don’t. What you need to do is find one that can give you the maximum income. Avoid doing a lot of things at the same time. Follow the 80/20 rule so you can focus on what’s important.
Money can’t buy everything
Money can solve a lot of problems and can make life easier. But it can’t buy everything. It can’t buy friendship or love. Build great relationships and live life. These are only a couple of the things that money can’t buy.
Don’t just keep your money in the bank
You’ll earn only a few percent if you keep your money in the bank. The purchasing power of your money that you’ve kept in the bank will be less in the future. A bank is where you put your money. But it won’t help you make money.
Banks can make money out of thin air
Banks are allowed to make money to a certain degree based on the amount of money that was deposited into that bank. The money that was deposited into the bank will be given to those who take out a loan, which comes with an interest rate. The bank will not inform you whom they’ll lend your money to. When you check your account, your money will still be there and you can withdraw it anytime. Banks follow fractional reserve banking, wherein they’re allowed to keep 10% of the deposits and lend the rest.
Borrow from banks and invest it to make money
Money that you can borrow below inflation rate is considered free money. If you borrow from a bank that offers an interest rate that is lower than the interest rate of the savings account where you plan to deposit it then you’re making money. You can also invest the money on something else as long as the expected returns are higher than the interest that you’ll have to pay for the loan.
Richer people get lower interest rates
Banks are not charitable institutions. They need to maximize their profits and they must have a business model that is profitable. If not, their business will not survive. Banks also prefer to lend money to rich people rather than poor people. Banks can rest easy when they lend to the wealthy because they’re not at risk of defaulting on their loans. If they can’t pay, the wealthy have other means to pay the bank, like selling a part of their business. Aside from that, richer people often get lower interest rates because they’re considered as low risk borrowers.
Don’t risk money you can’t afford to lose
A lot of people have made money through investing in stocks. Although it’s an excellent way to make money, it also carries risks. If you plan to go this route, you must be ready to lose money. One of the many pieces of advice that you need to remember if you are interested in investing is to never risk more than what you can afford to lose. You can invest freely as long as you have extra money. Don’t invest cash that you will use for your bills, food, and housing. Aside from not using the money for your essentials, you should also have an emergency fund before you risk your extra money for investing.
Live below your means
This is an obvious reminder but many people still ignore it. You should always spend less than you make. This will help keep you afloat when you face a personal crisis. It will help you save more money and build your wealth.
Pay your bills on time
Avoid making late payments. Make it a habit to pay your bills on time. There are two main reasons why you’re unable to pay your dues on time. Either you don’t have enough cash or your personal finances are in chaos.
Thanks for staying with me till the end. As promised, here’s your bonus. You can add these five additional money rules you can add to your list.
Create an emergency fund
You need an emergency fund and make sure that it’s enough for your spending. As its name suggests, it should be used only for emergencies and not for overspending.
You should have money goals
Create money goals. It will help keep you motivated to achieve your objectives. Money goals help keep your eyes on the prize and avoid unnecessary spending.
Maintain your investing discipline
Continue saving money, whether it’s a good or rough time. Invest regularly and develop a habit of living below your means while building up your nest egg.
Review your investing plan regularly
It’s always a good idea to create a solid investing plan. But, it’s also recommended to update your plan on a regular basis especially if it’s needed to meet your needs or objectives.
Learn from your mistakes
As you start investing, you will commit mistakes along the way. But you need to forgive yourself for these blunders. Try not to feel discouraged and don’t try to take big and uncalculated risks just because you want to recoup your losses. What you need to do instead is to turn each mistake into a learning experience. Find out what went wrong and how you can avoid doing the same mistake in the future.
We hope that this blog has helped you. Follow the money rules I’ve provided here and see the difference. You can also check out my previous my bogs such as “17 Things To Never Spend Money On“. If you have any questions or comments, feel free to drop it in the comment section below. If you have other tips to add, don’t hesitate to reach out. We’d love to hear from you. Don’t forget to hit the share, and subscribe buttons. Visit my site regularly so you’ll be updated whenever I post new blogs.
Recommended books for further reading:
- How to Make Money in Stocks: A Winning System In Good Times And Bad
- Money: Know More, Make More, Give More: Learn how to make more money and transform your life
- Rich Dad’s Increase Your Financial IQ: Get Smarter with Your Money
- Money: The Top 100 Best Ways To Make And Manage Money – Ace McCloud
- Money Master the Game: 7 Simple Steps to Financial Freedom
If you are looking to open an investment account, follow these links below:
- Passive income
- Silver & Gold coins
- Interactive Brokers
(‘68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.)