Basic Investing Rules: I will do my best to share some important personal finance ideas with you. Many successful people have mentors who help them learn the skills that lead to success. We frequently hear that we learn a lesson after a life test. When it comes to money, the same thing holds. You can’t go back in time and fix catastrophic financial mistakes that you have made over the years. The money game is a field where everyone is a player as long as they’re alive. Before you get tagged by the more experienced players, you need to know the basic rules.
What Are The Four 4 Pillars Of Personal Finance?
The four pillars of personal finance are a framework for understanding and managing your financial situation. They are:
- Income: The money you earn from your job, investments, or other sources.
- Savings: The money you set aside for short-term and long-term goals, such as emergencies, retirement, or large purchases.
- Debt Management: The process of managing and paying off debts, such as credit cards, loans, and mortgages.
- Investment: The process of growing your wealth by investing in assets, such as stocks, bonds, real estate, or other investment vehicles.
These four pillars work together to create a comprehensive framework for achieving financial well-being. By understanding and balancing these pillars, you can make informed decisions about your financial situation and work towards your long-term goals.
Rules
Rule #1: To make money with money. If you save money, you can make money. can only avoid being a wage slave for the rest of your life. The money you make in your savings can be used to spend more money on living expenses, shorten the time until you retire, or even let you have no retirement at all. So far, saving and making money with it so far: how are you getting along?
In the future, you will no longer make money with each dollar that you spend now. I’m not saying that you should stop going to restaurants or going to the movies. I’m saying that you should use common sense, like looking at your four biggest expenses over the last few months and working hard to cut them down.
There is a big problem with the first rule if you have a debt of any kind (other than a mortgage for your home) or a lease of any kind. If you have personal debt, you lose money that could have worked for you over your whole life. Having personal debt is like having a big hole in your wallet. It’s a big deal when someone says, “I can afford that monthly payment.” The money moves from the people who have it to the people who don’t have it.
The “have-nots” are the ones who say that. When you buy something, don’t think about how much money you can afford to pay each month. Instead, pay in cash after you’ve saved up for the item. The price of everything that you buy with zero-interest payment plans must be too high to be worth it. Behind the scenes, your payment contract is sold to a lender at a certain interest rate, and retailers don’t do this without making enough money to make it worth their while. Ask retailers how much the item will cost if you pay it all at once, and you might get a better deal.
Rule #2: Keep your finances in order at all times. The first step to losing financial control and spiraling into debt and money problems is to not deal with your own money. With health, life, disability, and car insurance, you can protect yourself from big financial problems. You should plan and save before you buy something. It’s important to look at your balance sheet at least once each year to see how things are going. To make sure you pay your bills on time, contact the creditor and tell them what’s going on. You can also make a partial payment and let them know. If you can’t do any of this for a short time, ask for help right away and find someone you can trust to do this for you.
Many people get into financial trouble because they have had a bad experience in their lives. The problem could be health-related, emotional, or financial. This could be because of a divorce or the death of a loved one, or it could be because of money (losing a job, cut in pay, relocation, unexpected expenses). This leads to three emotional problems: first, denial, and then overwhelm and hopelessness. It doesn’t matter what the source is, though.
Denial makes people not open their mail and keep spending the same way and being overwhelmed stops people from getting help and dealing with the situation. If you just lost a close friend or family member, you might not want to balance your checkbook or pay your bills right now. Unfortunately, small amounts of debt grow with interest and penalties into huge mountains of debt that seem insurmountable. This leaves you with options that you don’t like, like bankruptcy, poor credit, declining lifestyle spending, and stress that you carry into relationships and work.
It’s #3: Pay attention to the money of the people you spend the most time with. Even if they’re your family and friends, or your coworkers and friends, these people have the biggest impact on your money. Is the money game that they play always fair? Do they make about as much money as you do? In this case, I think you should start spending less time with them, and I’ll explain why: If they don’t always follow the first two rules, it’s not likely that you will either.
There are two rules that you unconsciously follow based on the people you see. The more people you see who don’t follow these two rules, the more likely it is that you will follow them. Everybody does it to some extent, and this is how we do it. There are also times when they make more money than you do. You may get into debt trying to stay ahead of them (e.g., meeting them at their favorite expensive restaurant, joining them for another expensive vacation, buying a new car because yours is the junker among all of your friends, etc.). If most of your friends earn less than you, you will become the group’s banker.
Putting your credit card down to pay for dinner, for example, is something you’ll do a lot. People will say they’ll pay you back later, but 50% of them never do. They don’t mind taking advantage of you because, after all, you earn more than they do. Or, you and your friends have to pay a deposit to rent a house, and your friends expect you to write the checks because you have the money and they don’t.
The neighborhood where you live also makes you feel like you have to break your first two financial goals. As I’ve already said, your neighbors are likely to become your friends. But they also have an impact on the size and style of your home, as well as the price of furniture and the size of your TV. So pay very close attention to how your neighbors are doing with their money. If you don’t like how they are meeting the first two rules, move somewhere that is more in line with your financial goals.
If your family and friends don’t have good money habits, look for more people to spend time with who have good money habits that you want to copy and learn from. When I’m with friends who make a lot of money, it’s hard to follow the first two money rules. Just make sure that the people you hang out with aren’t too far above or below your income level.
Rule #4: The other three rules should be sped up as well: Add to your savings by increasing your income by getting a better job. A means to an end doesn’t matter whether you like it or not. It’s progress toward rule # 1. Increase how much money you save by cutting back on four of your biggest expenses very quickly. Make sure you spend time with people who talk about investing their money and are building their wealth the fastest. Hopefully, you can take the next step in the money game by following all four of these rules.