What’s your personal finance strategy? If you asked me a few years ago, I would probably laugh it off: “I’ll leave that for tomorrow.”
Yes, earning more is important. Not only for your bank account but for your career development. As you get better and have more experience you can earn more.
But we must stop thinking that the solution to all our problems is more money. We’re better off by creating a strategy that helps us to manage money better—that alone will help us break away from the average earners. To do that, here are 5 money rules that will increase your net worth.
1. Desire Less
Here's some common sense, it takes more time to make money that to spent it. You work thousands of hours to make a certain amount of money. And then, you can drop it all in a new car, luxury vacation, watch, or anything else that you desire.
We all know that, right? And yet, we keep on spending money like it's nothing. I know this is something your grandad probably said, but the easiest way to grow your bank account is NOT to spend at all.
It's solid advice, the ancient stoics knew about this too, True freedom means you desire less.
2. Know-How The Economy Works
When does the interest rate generally go up? When does it go down? What are bonds? What is inflation? When do you get inflation? What is the market cycle?
Why do economy generally collapse? What's debt? Who prints money? Why do they print money?
One can go on forever, but you get the point. Look, you don't have to be an economist (I sure ain't one). But do yourself a favour, read a book like A Random Walk Down Wallstreet by Burton Malkiel. It's an excellent summary of how the economy and investing work. Or, spend sometime on Investopedia.com and figure out the answers to all the above questions.
The point is basic knowledge about how all this stuff works prevent panic. Panicking will not help you.
3. Avoid Personal Debt
Personal Debt destroys net worth like nothing else. To be clear, I don't tink there is anything with borrowing money.
If you want to start a business or do real big estate deals, it's often necessary and smart to take on debt. But we must be wise about taking on debt. Like investing, there are rules to it.
One thing is sure: Never borrow money to buy a car, electronics or anything else that goes down in value.
But when it come to more complex things like growing/starting a business, investing in real estate, or even your education, think carefully you go into debt. Remember that borrowing money is not free.
4. Save As Much As You Can
This is now obvious. Desire less, avoid debt, and save as much as u can. Personal finance is called personal finance for a reason.
Your money strategy depends on your age, personality, a place you live, education, experience, etc. A person who lives in Manhattan probably can't buy an apartment. It's overpriced, and renting is probably smarter.
Buying an apartment makes more sense in a city with more lower real estate prices. In that case, renting is more expensive. No matter what you do, always make sure you have enough cash so you can make an investment if you spot an opportunity.
How much in saving is enough?
That's up to you. What figure makes you feel comfortable?
5. Have A Short-Term Strategy
This article is for people who do NOT want to become professional investors or traders. We invest for the long-term not to make money in a day or even a year.
Investment strategy should be focused on the long-term. But that means you also need to generate income today so you can pay your bills. How do you do that? That's your short-term strategy.
Your personal short-term money strategy should be based on improving your personal skills and creating multiple income streams. Invest alot in your personal education because you will realize more skills and that also means more earning power.
Also, don't rely on one big paycheck. Instead, have multiple ways of generating value. That means less risk. If one income streams disappears, you'll still have others.
You see, these rules are not all about making more money. Yes, it's important to have multiple income streams. But before you focus of generating more money, get better at dealing with the cash you already have, and improve your skills.
The most importantly question to ask yourself today is this: Can I generate value?
If the answer is NO, then make it your first priority and turn that into a yes. Figure out how successful people are rewarded. You can't learn from one article. Read books, study investors, try things out, talk to wealthy people, etc.
When you find out how to make your bank account grow instead of decreasing it, you're already on the way to make your net worth grow.
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