Money plays an important role in our daily lives, and making the most of what we have will help us live a life free from financial stress. By learning a few basic rules, you can make life easier for yourself and those who depend on you. These are my ground rules.
one rule. Do not borrow money for consumer goods. What are consumer goods? They are things that lose value over time. The things you want but can live without. Examples are electronics, magazine subscriptions, mobile phones for cars, etc.
Rule two. Convince yourself to live. In other words, spend less than you earn. I know this may sound difficult if you’re on a budget but just getting easy credit when it’s available to you is simply an invitation to financial disaster.
Third rule. Becoming financially literate. This can only be done by reading everything you can about the different investment options available to you. There really is no excuse for not keeping up with all the financial news since there is so much information about financial matters available both online and off.
Fourth rule. diversification. The mistake some investors made in the past was to put all their eggs in one basket only to find that the company they invested their money in faded away. Wise investors diversify. This is to distribute their money in various companies to reduce their risk.
Fifth rule. Keep good company. There are people who have bad attitudes towards financial planning and money in general, and if you spend a lot of time with these people, the attitudes can influence your thinking.
Sixth rule. Take responsibility for your own finances. Some people will ask others for advice just so they have someone to blame if things don’t work out for them. A financial advisor will tell you to do this or that, but at the end of the day, it will be your money and you are the one reaping the rewards when the markets are up or taking a hit when they are down.
rule seven. Take a long-term view of your investments. Investing your savings is a long game, and in order to profit from the gains in the markets, you need to take a hit once in a while, which means not to panic when the markets go down.
Eighth rule. Keep the big picture in mind. In other words, have a goal or objective in mind. Are you saving for a house deposit or your retirement?