Many of my students and prospective students get scared away from trading by the thought of having to procure 2000-5000 dollars to put in their brokerage. Most of them being college students have the habit of living in the three-, sometimes even two-digits.
Some of my clients are forced to trade in valuable shares to continue operations after blowing all initial funding on the MVP.
Countless self-published authors spend hundreds of hours perfecting their novel, yet when it comes to cover-design cannot afford a professional to do it, costing them countless sales.
The story is always the same. While one may not be able to buy success, money does in fact play a huge role in it. Without money you can’t trade. Without money, others will use it as leverage to buy into your ideas and work without contributing beyond the monetary value. And without money, that manuscript of yours will likely be less polished and die on the slush pile.
Money makes the world go round, which is nothing new to most of you. Here are 7 principles, inspired by “The Richest Man in Babylon” that will help you safe more money, and empower you when you really need it.
1. Pay Yourself First
Paying yourself first is the biggest key to financial success. Every time you get a paycheck deposit at least 10% immediately to savings. Human psychology dictates that we can work with whatever we have. While Bob may insist that he can’t give up these 10%, there have been times where he lived on 30% less due to less income. Ergo: it’s possible. If you are reading this you are most likely off very well. How do I know? Even people at the U.S. poverty line belong to the 14% richest individuals in the world.
2. Control your expenses
It’s common sense, yet the fewest people apply a budget or spending plan in practice. Ask yourself how much you need a month for food, make generous estimations. Make that number more than you think you need. Now stick to it strictly. If your desire to save (for a certain purpose) is stronger than buying soda everyday, you can challenge yourself to save a little extra every month. You do not have to go Anti-materialist, but ask yourself “What do I really need?” and “Does this make me more happy than the thing I am saving for?”
3. Earn rental on your money
This is the point where you stop being the victim of capitalism. If you closely followed step 1 and 2, and have not spent all your cash on whatever it was you are pursuing, then you should have a nice padding in your savings account. Now it’s time to invest it. I am not a financial advisor, but I encourage you to explore the countless options available to you, from real estate, hedge funds, corporate bonds, to annuities. The idea is that your ‘idle’ money is no longer idle, but actively brings in an extra 5-10% a month.
4. Protect your capital from loss
There are always those stories of people that made it big… only to lose it all. Make sure you safeguard yourself. Have a good insurance for your home, car, and yourself. This will eradicate some of the bigger unsuspected risks that may be hiding in the future (knock on wood). Another way to protect yourself is to mentally separate security from cash flow. This means that trading penny stocks is not what you do with all your savings money. Instead diversify, leave some money in cash, put some money in gold and silver, and put the rest in safe investments (A hedge fund with a track record, or a company that hasn’t defaulted on their bonds in 20 years). This will build your security, we will talk about trading soon.
5. Own instead of lease
The number one here is your house. But it also applies to your car, and anything else you may be tempted to pay in installments. Paying up front cuts away a big chunk of extra cost which is great. If you can’t pay up front, consider financing over leasing. Rates can be tweaked to come out the same, yet at the end of one term you own the property/car, while the other leaves you empty handed, forcing you to jump onto the next lease. Once you own something, you do not just get use out of it, but it serves as a security as well. Also you are less likely to get into a deal that is above your price range when you buy, because leasing gives us a false impression of being cheap and we overpay.
6. Create additional Income
Here is where it gets fun. You can’t save yourself rich (you technically can, but here is how you speed the process up). Break all your income down into monthly cash flow. Most people only have one source, a job. Other options include: trading, real estate, sales-commissions, intellectual property, online advertisements, network marketing, a 2nd job etc. Your goal is to add more sources of monthly income and grow them over time. This may take the shape of your $3,000 a month job, supported by $500 a month you make through trading. That grows over time to $1,000 a month, and then you may have enough money to buy rental properties that bring in an extra $1,500 a month etc. Start small… start where you are at today, and start adding monthly income. Be creative and use all you have, resources, skills, and connections.
7. Personal Development
It is the last, but certainly not the least, of all points. Personal Development is key to all success and wealth. How do you personally develop? Feed your mind on a daily basis. Read books on your area of expertise or something you have never learned about. Study human nature, because psychology always comes in handy. If you are not a big reader, there are countless resources online, such as mind-bending TedTalks that will inspire you and give you ideas. The biggest piece to personal development, is to become proactive and self-aware. Know what you want, plan ahead, and watch your thoughts and emotions closely. If you were a stock, personal development is the way to increase its value. Spending at least 15 minutes a day on personal development will change your life in a months time.