Seven Money Rules For A Successful 2022
Control your money, don’t let your money control you.
Financial challenges can be a burden on all of us. It doesn’t matter how much you make, if you don’t follow these 7 rules of money, you’re going to find yourself constantly stuck and stressing about money all the time. Take Orlando Bloom and Nicholas Cage for example. Both had great acting careers that accumulated them a net worth of $150 million before they spent it all and found themselves bankrupt. There are other once-wealthy individuals who have found themselves in a similar situation.
Now, not everyone encounters these challenge, but in order to avoid them, it’s important to know how to manage your money. Managing your finances can sometimes seem like a full-time job. There are a lot of decisions to make and things you are constantly learning about.
But, money management does not have to be complicated if you just step back and look at the big picture.
If you follow best practices that have proven to be effective, you aren’t going to have any issues managing your money. What are some of the best practices for money management? Just follow these 7 money rules and you’ll be on the path to a worry-free financial life.
1. Pay Yourself First
This is the key to financial freedom! It sounds too simple, but this is the secret. Change your thought process from the difficulty of saving, to the empowerment of paying yourself! You worked hard, you deserve that money.
Pay yourself first! At least 10% of what you make is for you and your future. Put it into a 401k, a Roth IRA, or even an index fund. It really doesn’t matter just as long as you pay yourself first.
Once you take the first step of Rule #1 and pay yourself first, your world will change. Not only will it feel good now, but your future self will thank you when you are sitting on millions of dollars worth of investments.
Financial freedom truly is attainable for all. Pay yourself first and you will realize this in about 40 years!
2. Control Your Expenses
At the end of the day, wealth — and the accumulation of wealth — comes from a gap between spending and income. The bigger this gap, the more money you are going to be able to save. The more money you can put away and save, the more you can use it to generate even more money by investing in yourself.
Here’s an example, if you make $100,000 per year and spend $99,000, you’re going to be financially behind someone who makes $50,000 and spends $45,000. A person who makes $200,000 but spends $201,000 is always going to be in debt.
If you want to free yourself from the constant financial burden you are experiencing, control your expenses. Stop buying stupid things and start saving more of that hard-earned cash.
3. Multiply Your Money
Make your money work for you. Put it in an account earning compound interest.
Albert Einstein said that compound interest is the most powerful force in the universe. It is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.
You would be surprised by what you can do with investing just $5 A DAY from when you are 25 to 65. That’s right, for the price it costs to buy a cup of coffee, you will be a millionaire by the time you retire.
How? It’s largely due to compound interest. Basically, compound interest is how your money makes money on your behalf. If you invest, it means you not only earn a return on the initial amount of your investment but also earn a return on your earnings.
If you put $5 a day into an index or mutual fund that has a return of 12% (S&P500), you will have $1,054,772 after 40 years. That’s right, $25 per week over 40 years can make you a millionaire.
4. Guard Your Money From Loss
“Never lose money.”
That is Warren Buffet’s #1 rule of money.
What is rule #2?
“Never forget rule #1.”
Obviously this is a lot easier said than done, but do your best to guard your money from loss. You can achieve this by doing your research before you decide to invest any of your money.
Don’t invest in companies just because somebody on the internet told you it was a good idea. Do your own research and avoid speculative opportunities and those telling you a stock is going to experience massive returns.
Remember, a 50% loss requires a 100% gain to break even.
Be smart with your investments. If you are new to investing, play it safe and look into ETFs such as the S&P500 and QQQ. Historically, these ETFs will earn you a 12–25% return on a yearly basis.
5. Create more streams of income
When time allows, create more streams of income.
Want to know how millionaires are able to make so much money?
They have 7 different streams of income.
This helps so that in case they were to lose one stream of income, they would be able to rely on the other 6 established sources of income.
Let’s hope this isn’t the case, but think about this scenario. If you were to lose your job today, would you be able to maintain your current lifestyle?
The majority of us would struggle to. Some of us may even want to crawl in a hole and never come out.
But that’s where it’s beneficial to be able to rely on other sources of income. If you have seven streams of income built up, losing one isn’t going to impact you as much as it would for someone who only had one or two streams of income.
6. Secure A Future Income
Income is everything. Without it, you simply aren’t going to make any money.
Sorry, it’s just the truth!
If you really want to secure a future income, find a way to maximize the income you earn from the 7 sources of income we previously talked about. It’s so important that you build more income and streams of income before you find yourself in a sticky situation.
Whatever you do, don’t wait until tomorrow to start securing more income streams. You never know, tomorrow might be a day too late.
Start today!
Not to get all motivational, but take into consideration what the world is currently going through. Do you really want to be one of the many individuals who are struggling financially right now? Maybe you already are struggling. Either way, learn from the mistakes all of us make and secure a future income.
7. Increase Your Ability To Earn
How can you earn more money?
There are many things you can do to increase the amount of money you earn.
Start by increasing your education. This doesn’t necessarily mean an advanced degree, but just become more knowledgeable.
Ask for additional responsibilities at your current job. Show them you want it.
Start a side business. Trust yourself and take your thoughts from an idea to a business.
As you earn more, you get to pay yourself more. If you believe you deserve a raise at work, talk with your manager about it. Don’t just tell them you deserve a raise. Show them why you deserve a raise and demand one. If not, start finding other options. If you believe you deserve a raise, you will have no problem talking with your boss about getting one.
Aside from that, find somebody who has achieved the success you envision and use them as a resource to connect to. Ask them how they got to where they are in life and follow in their footsteps. Read books on successful individuals, listen to podcasts, study the pathways of the successful individuals around you. Here’s the thing with the internet, all of the information is our there, you just have to seek it out and decide if you are willing to put in the work to achieve it.
There you have it, seven skills that will help you to be better with your money. Obviously there are more, but these are the ones I feel are vital to achieve financial success.
