The 7 Simple Rules of Money
Money is important.
If you want to make your dreams and desires become a reality, you must learn to be successful with money. You need to know how to acquire it, how to maintain it, and how to grow it.
The good thing is that the core concepts of money aren’t complicated. In fact, they’ve been the same for hundreds of years. If you can understand and master the fundamental rules, then you can build wealth beyond your wildest dreams
One of the best books about money is The Richest Man in Babylon by George S. Clason. The book tells the story of Arkad, the proclaimed richest man in Babylon. At the bequest of the King, Arkad shares his “seven cures to a lean purse” to teach the people of Babylon how they themselves and the entire city may come to acquire great wealth. These cures or “simple rules” are still applicable for building wealth today.
(1) Begin to expand thy purse by saving money.
Arkad’s first money rule is to save money — or, to put it another way, to pay yourself first.
The majority of individuals certainly do not do this.
When you buy a new iPhone, you’re supporting Apple; when you purchase a cup of coffee, you’re supporting Starbucks (or whatever your favorite coffee shop is).
That’s not saving money; that’s giving it away.
Finding a means to keep, i.e. save as much of your money as possible, is one technique to pay yourself first.
Your ability to do so underpins the entire wealth-building process.
You should invest as much of your money as feasible in order to increase your net worth.
By default, Arkad recommends setting aside 1/10th of your earnings, with more if you can afford it.
If that means cutting back on your recreational spending, then that’s exactly what you’ll have to do.
Just make sure you’re putting money aside on a regular basis.
That 1/10th may not seem like much at first, but it adds up quickly over time, especially when combined with the other money restrictions.
(2) Keep a close eye on your spending: don’t go overboard.
This mainly entails learning to live within your means and staying away from lifestyle creep.
As your income rises, it’s normal to desire to spend more.
However, if you want to increase your fortune, you must fight this impulse.
If your salary rises by $10,000 but you decide to spend it on an extra vacation to an exotic destination, new furnishings, and new television, you’ve just spent your newfound wealth.
Unfortunately, this is not unusual – there are bankers, lawyers, and surgeons with a negative net worth in New York City, all because they couldn’t resist the impulse to upgrade their lifestyle on a regular basis.
You may swiftly build your money by spending less than you earn and avoiding lifestyle creep.
Always ensure that your total expenses are a comfortable margin below your income.
When your income rises, just raise your expenditure by a limited amount; the rest should be saved or invested.
Every additional dollar you earn will increase your net worth.
When you increase your income, the rate at which your wealth grows increases as well.
That is the fundamental key to accumulating wealth.
(3) Invest your savings to make your gold double.
It’s great that you’ve been saving money by following rules 1 and 2, but there’s a lot more money to be made here.
It will be difficult to accumulate riches if you have a steady salary.
You can only work so many hours in a day to make more money.
Even if you could work longer hours, any money you have in a bank account will lose value over time due to inflation, which averages around 3% each year.
Putting your money to work to make you more money is the best method to increase your wealth.
That is referred to as an investment.
Read also;10 Attitudes That Make The Rich Richer
You should put as much of your money into investments as feasible.
Stocks, bonds, real estate, and precious metals are all thousands of years old investments (though their precise form may have changed).
You purchase assets, which then increase in value while you sleep, with no further work or effort on your part.
If you have money in a bank account, try to think of ways to put it to better use by purchasing an asset with a higher growth potential. In addition, you should make use of the power of compound interest.
Use the money you get from your holdings’ dividends to buy more assets.
Your money makes more money for you, and that new money makes even more money for you.
It’s a lovely snowball of wealth
(4) Protect your wealth by avoiding dangerous investments.
There are a plethora of investment possibilities available to you.
But the most important thing is to keep your principle intact.
Warren Buffett once revealed his two money rules
“Rule No. 1: Never, ever, ever, ever, ever, ever, ever, ever, ever, ever lose money
Rule No. 2: Remember Rule No. 1.”
Losing your principle means that all of your hard effort to earn that money was for naught.
That’s a disaster!
Always choose investments that you have thoroughly researched and are convinced will increase in value.
Even though the possibility for growth is slower, be sure you don’t lose money.
Of course, all investments have some level of risk associated with them.
The greater the potential payoff, the greater the chance of failure.
The trick is to establish a balance: take certain risks that will pay off handsomely, but not with all of your hard-earned cash.
Put the majority of your money into safe assets, and then take a few risks to increase your returns.
In this case, the barbell method can be a smart choice.
Diversify and balance your portfolio. Most importantly, always always always do your research before buying any kind of asset. Make sure that the risk justifies the potential reward and that those rewards are based on reality. If something sounds too good to be true, then it
(5) Make your home a successful investment: your home is a valuable asset.
The average person’s home is the most expensive purchase they make in their lifetime.
If you can leverage the money you invest into your home to generate additional money, just like any other asset, that will be a great benefit to you.
Buying a house is the most typical strategy to profit from your home.
Over the last 100 years, house prices have risen at approximately the same rate as the stock market.
Furthermore, you can improve them through renovations to increase the value of your home.
The greatest part: your primary residence generally comes with a slew of tax benefits, including tax-free appreciation in some cases.
Having said that, purchasing a home is not the be-all and end-all plan.
Renting a house is also a possibility, particularly in the short term.
Renting and not paying a mortgage allows you to diversify your assets by investing in stocks, bonds, cryptocurrencies, and other financial instruments.
House prices in some large cities are so exorbitant that renting and investing your extra cash will actually make you wealthier in the long run.
If you want to conduct some numbers on your own, there are rent vs. buy calculators available.
Final point: leverage your home to grow your wealth.
(6) Plan for retirement to ensure a steady income in the future.
No one can work indefinitely.
You will grow old one day, possibly still able to work but not at the same level as when you were younger.
It’s critical to prepare for such events.
You should invest as much of your money as feasible in assets and maintain it there for as long as possible.
If you start taking money out before retirement to spend lavishly, you can run out of money when you really need it in your later years but can’t work to get it.
Furthermore, asset growth will benefit you over time, especially with compound interest on your side.
Accounts for retirement and tax-free savings are both available.
This is also a terrific thing to take advantage of.
If there is any possibility to boost your sources of income and lower your taxes while you are not working, take advantage of it.
When it comes to long-term wealth creation, take advantage of every benefit you can. Gains of even a fraction of a percent pile up over time.
(7) Improve thy earning potential: work on becoming wiser and more talented.
At the end of the day, you get paid a sum based on your ability to earn it.
If you want to generate more money and raise your income, you must become wiser and more skilled so that your contributions are more valuable.
You can update your credentials by paying for online or evening programs. You can self-learn new technological skills.
You can develop more subtle but powerful soft skills by reading books.
You can go to networking events. Anything that can increase your value to a society where people are willing to pay you more.
This type of education should be aimed at a certain audience.
If you go read a book about spaceships but work in sales, it won’t help you make any more money (unless you’re a spaceship salesperson, of course).
Examine each skill upgrade’s possible return-on-investment.
That way, you’re continually putting yourself in a position to make more money.
These are the 7 simple money rules we learned today:
1.Pay yourself first
2.Spend within your means
3.Invest your extra money
4.Avoid risky investments
5.Leverage your home as an asset
6.Plan for retirement by targeting long-term growth
7.Upgrade your skills to earn more money
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