Stop making costly mistakes with your money and elevate your monetary outcomes
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1. Diversify your investment strategies
Understand the difference between short-term, mid-term, and long-term investment strategies and how each does or doesn’t align with your financial goals.
2. Hedge your investments.
If you own a bunch of stocks, consider investing part of your portfolio in real estate. Some people are all about bonds, notes, securities, high-yield savings accounts, etc. There are plenty of ways to offset your portfolio. Something you might want to consider avoiding is dumping all of your money into one asset class. One of my favorite sayings is, “Don’t bet all your money on one horse.”
3. Do your due diligence.
One of the biggest lessons I’ve learned about investing is due diligence. If you don’t implement this, you will definitely lose money. However, if you do your due diligence, you’re not immune to financial losses, but you can mitigate your losses.
4. Prioritize budgeting.
Set a budget and stick to it. #11 states to stay under your income. The only way to do this is to prioritize budgeting so you know how much is coming in and how much is going out.
A budget keeps you on track to meet your financial goals and prevents you from making costly financial mistakes that can set you back for years.
5. Define your passive income plan.
I don’t recommend that people quit working. Instead, I recommend that they find work that is fulfilling and pays well for the duration of their lives so they can remain active.
At what point do you want enough money in the bank or passive income to live comfortably?
How much must you save/invest each month to reach this goal?
6. Learn how to use debt.
Debt can either be your friend or your enemy. Most people accumulate more liabilities than assets. A few people use debt to accumulate more assets and money-making machines.
If you take on debt, always ask yourself how it can help or hurt you. If it’s going to hurt you and your finances, reconsider it.
7. Effectively manage credit cards.
The basics of credit cards you’ll hear from many sources:
Keep your utilization 10% or below
Always pay your bill on time
Pay your card in full each month
Only spend what you can pay back within 30 days of your statement due date
But most importantly, if you can’t handle a credit card, reconsider getting one in the first place. I didn’t get my first credit card until after I graduated college, and I am glad I did. It helped me further refine my financial discipline. By the time I got a credit card, I was so financially disciplined that I was able to manage it successfully.
8. Understand loans and interest.
Higher interest rates usually have equally higher monthly payments. Lower interests are better. If you can avoid unnecessary loans (e.g., car, student, personal, etc.), avoid them - unless they’re making you money or acting as a form of investment.
The better your credit (and sometimes income), the better loan rates you can obtain.
9. Educate yourself about credit.
Follows you wherever you go (house, car, renting, loans, interest rates) can dictate quality of life
10. Don’t be an emotional investor
Never go into a deal based on emotion. Always use logic and apply due diligence. Learn about a deal, study a deal, and be sure you have as much intel as possible. Try to understand what you’re investing in and why.
Don’t follow the follower. Be a leader and practice thinking for yourself; this doesn’t imply that you should be arrogant, but that you should ask questions, be thorough in your investment, and elicit advice from experienced investors who have nothing to gain from you.
11. Stay under your income.
This is the most basic concept, yet many people skip it. This is mainly because it’s easy to consider that we live in a society that encourages people to spend more than they earn and consistently inflates their lifestyle.
If you ever want to experience a positive net worth, build wealth, and have financial freedom, you must spend less than you earn.
It’s the most important financial concept you could ever implement.
Avoid living paycheck to paycheck
The next paycheck should increase your bottom line, but you should never be desperate for it. Be able to go without a paycheck for months or years even. That’s when you know you’re on your way to financial freedom.
12. Consistently increase your income.
At the same time, while you stay under your income, you should consistently increase your income so you are immune to inflation.
Don’t just accept the 1–3% average salary increase most employers offer. Aim for above this (6% and more) so you’re consistently outpacing inflation.
13. Diversify your income.
Do you still have one primary source of income? If so, get a secondary source of income immediately, and your partner’s income doesn’t count. There should be at least four income sources between the both of you.
The best way to get caught in a financial bind is not to have an emergency fund or a secondary income source if you ever lose your primary one.
14. Invest 10% of your income.
Some people are aggressive and invest 50–85% of their income. At a minimum, invest at least 10% of your income. That way, you’re always putting something away.
It’s better to put a little something away than nothing at all. Sometimes, one has to start small.
You might even have to start with 1%. But gradually increase the amount you invest. The more you invest (prudently), the more wealth you will have. Furthermore, the more you invest, the more money you have working for you around the clock.
15. Establish a 3–12 month emergency fund.
If you’re an entrepreneur or work for yourself, it is recommended that you have a 9–12 month emergency fund.
Let’s say you work for a traditional employer; in this case, a 3–6 month emergency fund might be adequate. However, I’ve found that three-month emergency funds tend to empty relatively quickly.
Figure out what works for you, and pick the months that would cause the least stress. The people who are least stressed about losing a job are the ones who aren’t living paycheck to paycheck.
Bare bones expenses
An emergency fund should equal the bare minimum expenses you pay monthly. Cut out all unnecessary and non-essential spending.
What’s left? That’s the amount you want to multiply by x months to determine how much your emergency fund will have.
Low-risk investing
Consider keeping your emergency fund in a low-risk investment account so it can make money instead of sitting still.
16. Avoid credit card debt.
Credit cards are alright. And sometimes temporary credit card debt isn’t bad, either. But if you’re consistently overspending and placing that overspending on a credit card, consistently maxing out your credit cards, and only paying the minimum payments, reconsider using a credit card.
Credit cards are tools. They can be used to help or hurt you. Unfortunately, credit cards hurt many people, but this doesn’t have to be true for you.
Only spend what you have in the bank.
Reminders:
- Set up automatic payments.
- Spend no more than 10–30% of your credit card limit.
- Always pay off the monthly statement balance to avoid paying interest.
- If you don’t have the cash in the bank, don’t use the credit card on a non-essential purchase.
17. Don’t buy more cars than you should.
85% of Americans have a car note. What does this mean? Most people can’t afford the cars they drive. Furthermore, people usually drive cars that are more than 10–30% of their gross annual income.
The average car is around 50 grand; this is the average salary. As tempting as it is to buy a fancy car, you must remember it’s only a piece of metal. Moreover, it’s a depreciating liability. It’s an asset once you pay it off, but it’s usually severely depreciated by that point.
Cars don’t hold a ton of value. Think twice before you invest your money into a set of new wheels. The new car smell wears off quickly. But the car notes don’t.
18. Don’t buy more houses than you should.
The same applies here. Society sets us up to be able to afford more than we actually can.
Buy what you need and only what you can afford. When buying a house, you must remember taxes, maintenance costs, HOA and community fees, etc. Aim to save at least 2% of the total house value each year to cover these costs.
What if I’m a renter?
Aim to spend no more than 10–30% of your income on housing. I recommend sticking around that 10% mark; if you do, you will rarely be stressed about housing costs.
19. Avoid student loans.
Education is essential, but it should never cost you peace. Students and adults around the world are swamped with student debt. Many don’t have jobs that provide income to cover student loan costs.
If you can go to school for free, do so. Everyone can apply to programs and scholarships, so apply.
The best kind of education is free education.
I ended up getting student loans, but I also knew I would be able to pay them off relatively quickly; this is not everyone’s story.
20. Continuous Education
If you’re not learning and growing, you’re regressing. Study personal finance to elevate your income, money mindset, and financial habits.
We don’t learn about money in school. So, we must teach ourselves so we don’t perpetuate financial ignorance and poverty.
Economic disadvantages don’t have to be permanent.
21. Learn how to negotiate your salary
Don’t accept any salary without countering the offer. You can usually get a little bit more than what is offered to you.
22. Understand what salary you need
Something I didn’t think about when I got my first big job was the cost of living. It’s basic, but I was so damn excited about the paycheck I didn’t consider it might not get me that far in the place I was living. Though my housing costs were virtually zero, if I were to have to get a place of my own, what I was making would not have been ideal.
Factor out how much you need not only to survive but how much you need to thrive.
23. Educate yourself about taxes
Taxes can get complicated, which is why you should learn about them. Don’t trust a tax advisor to do them for you blindly. Take some time to learn about them at a high level so you have insight into what’s happening with your taxes.
Recap
- Diversify your investment strategies
- Hedge your investments.
- Do your due diligence.
- Prioritize budgeting.
- Define your retirement plan.
- Learn how to use debt.
- Effectively manage credit cards.
- Understand loans and interest.
- Educate yourself about credit.
- Don’t be an emotional investor.
- Stay under your income.
- Consistently increase your income.
- Diversify your income.
- Invest 10% of your income.
- Establish a 3–12 month emergency fund.
- Avoid credit card debt.
- Don’t buy more cars than you should.
- Don’t buy more houses than you should.
- Avoid student loans.
- Continuous education.
- Learn how to negotiate your salary.
- Understand what salary you need.
- Educate yourself about taxes.
Don’t know where to start when it comes to investing? Start here
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.