These days, it takes thought and constant action to earn money. However, as your job progresses, you surprisingly find yourself working more hours, making more money, and spending more money. No matter how much money you make, if you are not attentive, your spending will always be greater than your income.
You’ve always done expense planning for whatever sum you get from parents and relatives since you were a young child. You developed a strong desire to appreciate this.
Even as you become older, you continue to keep track of where the money went and perform the arithmetic for the expenses you know about in advance. You feel more deserving of what you have because this offers you a sense of control over your finances.
Money Saving- a Difficult Task!
There are two situations that can occur when it comes to the money we make.
- Because it’s your money and you don’t have to answer to anyone, you’ll spend everything you make.
- You’ll take into account costs and ensure that your money is spent carefully on items that provide the greatest return on investment.
The first one is a complete waste and frequently results in discontent and eventual financial collapse. Our financial objective is to lead a contented, secure life.
Let’s take a look at how these 6 rules of money can assist you in achieving that.
6 RULES OF MONEY
Most aspects of our lives seem to be governed by rules: how much to eat, how much time to spend watching TV or using social media, how many hours to sleep, etc. We can maintain our discipline by following such regulations.
Similar to this, adhering to certain guidelines for spending, investing, and conserving money might help us manage our money more effectively.
1. Recognize Your Style Of Investing
This is the first rule from the 6 rules of money. Investors in the market come in a variety of forms. The list contains speculators, day traders, short-term, long-term, and other investors. They all pursue various rates of return, accept various degrees of risk, and use quite diverse strategies from one another.
Let’s look at an example to further appreciate how their approaches differ.
One of the best businesses in the world is Google. In the past five years, the price of its stocks has increased by more than 240%. What price will you buy Google stocks today, you ask?
Depending on who you are, the response will vary. It wouldn’t concern you if the stock price of Google increased or decreased by 0.5% or 1% in a day if you are a long-term investor who plans to invest for ten to fifteen years.
However, even a 0.5% increase or decrease in the stock’s price could be an important factor if you wish to buy and sell that stock on the same day.
As a result, you need to decide what kind of investor you want to be in this market and follow that strategy.
2. Extend Your Time Horizon
The majority of us have read books, watched blogs, and watched videos that tout Warren Buffett as the greatest investor of all time. One of the top 10 richest people, whose net worth exceeds $100 billion. Regarding the rate of return he has produced, Buffett is not the best investor.
Making decent profits and maintaining an investment for the longest amount of time are also examples of smart investing. That’s when “Time” turns into your ally and carries compounding’s magic along with it.
3. Always Make Future Plans
An important rule from the 6 rules of money is to establish the routine of paying yourself first to save money. Before paying your expenses after payday, deposit money to your savings account. You can save money automatically by setting up a recurring transfer from checking to savings through online banking at many banks.
Building up an emergency fund is the greatest method to deal with life’s unplanned expenses, and planning for the future also involves being prepared for the unexpected.
4. Returns And Risks Keep Hands-On-Hand
It’s not difficult to understand how risk and return are traded off. Higher risks accompany higher profits. FDs are a low-risk investment, but the post-tax returns hardly outpace inflation.
Taking the risk of investing in risky assets like shares is vital since building wealth necessitates beating inflation by a significant margin. The amount of risk you are incurring must be carefully considered. Anything in excess is never a good idea. Consider the amount of loss you can notice in your portfolio before choosing a course to increase your wealth.
5. Make Your Money Increase
Once your savings account starts to grow, you should look for ways to invest your money to increase its value. Particularly for long-term financial plans like retirement planning, this is crucial.
There are a variety of risk-level-appropriate investment tools accessible, but you should always make sure you fully comprehend the type of product you’re investing in. Remember, if you start saving and investing as much as you can as soon as you can, time is on your side for your retirement and other long-term goals.
6. Spend Money On Yourself
Every successful investor makes a self-educational investment. You will get more knowledgeable about the appropriate investing strategies if you consistently make an attempt to discover new things about investing. Additionally, you won’t make any costly errors.
You’ll be able to distinguish between irrelevant material and news with accuracy. Your choices won’t be influenced by rumors, click-bait headlines, or the market “expert” shouting the loudest.
Understanding these workable rules of money is important in money making. The basic guideline of money making is to modify one’s thinking and get suitable financial education. Making informed and shrewd investing selections is facilitated by financial education.
In order to invest successfully, one must first grasp how to use financial leverage, distinguish between various forms of revenue, how to increase that income, and how accounting and cash flow function.
Find the right instructors, educate yourself through numerous online resources and classes, and gain experience to master these guidelines.