Mindset & Psychology Personal Finances

The RICH Know Something About MONEY That the Poor Don’t: 20 Rules for “Communicating” with Money (That Will Make YOU Rich)

Money is equally important for every person – both for the rich and for the poor.

That’s just rich people, i.e. people with high incomes have learned to handle finances correctly.

This is their only difference from low-earning people who, for some reason unknown to us, were too lazy to understand the topic of money and options for increasing it. In this article, I propose to correct this unfortunate omission and very briefly go over the basic rules of financial literacy.

Twenty rules of “communication” with money that rich people know very well (but the poor completely ignore):

1) Turn on the “magic” of compound interest

Small (but financially smart) habits lead to big consequences and pleasantly weigh down our wallet.

Today you are required to make only a very small effort, to take one small step forward – but over time, your efforts will add up, “transforming” into prosperity and sustainable financial well-being.

2) Cash and bank deposits are only suitable for everyday household expenses and a “rainy day” nest egg, but nothing more.

Money must “work”, otherwise it will lose its purchasing power – it will be “eaten up” by inflation.

3) Create a “financial cushion” in case of emergency events (job loss, prolonged illness, etc. troubles).

As they say: buy an umbrella and keep it “with you”, because sooner or later it will definitely rain.

4) Money saved is money earned

Saving and earning are equally important.

However, not spending (i.e. saving at least partially) your money is much easier than earning it.

And in general, get used to “Spend less than you earn” – this is the most important rule of financial literacy.

5) Never pay full price

Try to shop for the best deals.

Don’t hesitate to ask about discounts, cashbacks and bonuses. Wait for seasonal sales on the item you like.

6) Invest – stocks can bring 7-10% per year (in dollars)

And this is adjusted for inflation.

No other asset or financial instrument can do this.

7) Insurance protects your property (life)

But an insurance policy does not bring wealth.

You definitely need to invest, and on a regular basis.

8) Do not choose the most profitable stocks (individual issuers)

Instead, invest your money in index funds.

It’s very simple and extremely effective.

9) “Don’t do anything, just wait”

This is the recommendation of Jack Bogle, the founder of index strategy and the “father” of the ETF industry.

Which, translated into simple language, means: “Buy indices and hold them for as long as possible” – this approach will certainly bring much greater profit than risky speculation and high-frequency trading.

10) Don’t touch the capital you created

You will definitely be tempted (and even, in your opinion, a strong necessity) to “put your hand” into the created (or still being created) financial capital.

Resist these urges and painfully “beat yourself on the wrist” – and then after a while, with the income from the created capital, you will be able to fully provide for your family for the rest of your life.

11) Keep your age in bonds

We are talking about the basic ratio of conservative and aggressive assets in your investment portfolio.

Keep a portion of your capital in bonds (bank deposits and real estate) that is approximately equal to your age (in years).

Example: If you are now 40 years old, then the proportion of bonds in your portfolio should be 40%.

The older you get, the lower the “risk percentage” should become.

If you are 60 years old, then keep 60% in bonds (and other conservative, i.e. low-risk, assets).

12) Buying an apartment is not an investment

This is your home.

And nothing more.

Investments should be completely different.

13) Buying experiences makes us happier than buying things

An exciting trip will remain in your memory for a long time, and buying a car will lift your spirits for just 2-3 weeks.

14) Make purchasing decisions on your own (and not under external pressure)

Don’t be fooled by an advertisement you see or a photo of a new item posted by your friends on social networks.

Keep your wallet “locked” – remember that emotions dramatically increase our expenses.

15) Shop “according to the List”

Because stores are purposely created for you to make a lot of purchases that you had not planned at all before.

16) Divide the premium in half

Use any unexpected income (bonuses, gifts, social benefits from the state, etc.) carefully and wisely.

Alternatively, spend 50% on yourself and improving your quality of life, and use 50% for “work” in investments.

17) Training is your future income

Therefore, regularly upgrade your professional competencies.

18) Talk about money with your significant other

I know that this can sometimes be extremely difficult to do because… this topic is taboo in our society.

But otherwise, it will be difficult for you to achieve your family Dreams and financial goals.

19) Talk about money with your children

Pass on your financial knowledge and practical money handling skills to them.

Most of the habits children learn come first from their parents (and start before the age of 9).

The fact is that every child is programmed by nature to learn according to the principle “monkeys see, monkeys repeat.” This is why children quickly adopt their parents’ habits (both good and bad) – so teach them good things!

20) Don’t put off until tomorrow what you can do today

Because “tomorrow never comes.”

Do something positive for your family finances today.

Maybe just a little bit, but just today!

Read 2 pages of any financial literacy book. Top up your financial cushion by $20. Buy a $50 index fund, etc.

By CashGuy

Online Money Maker

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