Hey All,
There are like hundreds of money rules out there. Some rules might work good for someone and some may not. As these money rules take into consideration various factors. In this blog, I am going to talk about the top 3 money rules that I've been following and are based on a lot of mistakes and learning experience. Therefore these money rules that I talk about are general rules and is also based on my experience that has been working well for me overall.
Rule No.1 - Understand What kind Of Investor You Are
There is no denial to this that we have different kind of investors in the market. Some are long term investors, some are short term, then there are intra-day traders, and so forth. You need to first understand what kind of an investor you are and based on that you should be entering to the market, understanding the risk being taken and the returns associated to it. For example a short term investor may be looking for immediate GOALs but at the risk they are taking is very high. Whereas a long term investor may also be looking at high returns but then they lower their risk as their investment horizon is for longer term. Therefore it becomes important for one to understand first - what kind of investor category they fall into. Speaking of myself - I fall into a long term investor category.
Rule No.2 - Risk And Returns Go Hand In Hand
Now that we have segregated that type of investor we are. We need to know risk and returns go hand in hand. The trade off here is that Higher the risk - higher is the return. We all know crypto investments are considered as high risk investment but then at the same time the returns are also high. Having said that, one must be careful about how much risk they are taking i.e. what is their risk appetite - should be well assessed. You should be in a position to answer this basic question - as to how much loss you can take or see in your portfolio and based on that can you should be able to choose a path to formalize your investment strategy accordingly.
Rule No.3 - Do not Buy Liabilities - But Assets
This Money rules is one of my favorite RULE.. Buy assets not liabilities. Lets take a simple example here; buying house with a loan taken is not considered an assets. Rather this is a liability that you have taken as you need to pay the EMIs to the bank. But if a house that has been bought without taking a loan then this is considered as an assets as this can generate some sort of rental income stream for you. Assets help build assets whereas liabilities attracts financial burden. Therefore the point and the money rule here is to ensure that you engage in buying assets, not liabilities.
Rule No.4 - Invest In Yourself
An investment in knowledge pays the best interest.” — Benjamin Franklin."
Finally the money rule that I normally follow is to invest in yourself as well. This has a broad meaning but here what I do do things that I like doing. Lets take for an example that You have earned a hefty profit or made some good money then enjoy with it as well. For someone the enjoyment can be a trip or a vacation to some foreign country and for someone it could be further enhancing their skill sets. Not matter what the case maybe but the point is to invest in yourself as the case maybe. Investing in yourself can ultimately lead into improvements in many areas and if we speak about finance specially then you may see improvements in your productivity and happiness.
These were the Top 4 Money Rules that I normally follow and have observed that they really help with your investment and taking decisions around them. The bottom line is when you make the money rules - whatever works for you as a natural part of spending, saving, and investing money. And ultimately will surely go a long way in achieving financial success or as a matter of fact financial freedom... cheers.
Have Your Say On Money Rules...
What money rules do you follow? Do you have any picks on the money rules working for you? Let me know your thoughts in the comment section below... cheers
Top 4 Money Rules that Everyone should follow
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