8 Rules Of Money
In this blog, you will learn about The 8 Rules Of Money.
There is a famous quote that says "It is not LACK of Money that causes financial problems in your life, it is the lack of FINANCIAL EDUCATION."
This means that there is no problem with our low salary, the main problem is lack of financial education which has never been taught in school or our families.
People feel that when their salary will be increased, then all their problems will be solved. But this does not happen in maximum cases, when people get their salary increased, then their expenses also increase and they get caught in the rat race and struggle financially.
If you want to become rich and live life without worrying about money then you need to get Financial Education and know the rules of money.
So today I will share 8 Rules Of Money which will help you in achieving financial freedom.
Rule No 1 - Save Money
How much money you save is more important than how much money you earn and even more important is how much money you invest.
Now it is not as easy as it sounds because maximum people make the same mistake. They want to earn more money so that they can spend more money. If you buy an I-phone then Apple company will earn money, if you buy a car on loan then banks and car companies will earn money from it and in end, you are left with nothing and you start waiting for your next month's salary.
If you continue this cycle of earning and spending then you will never become rich. To become rich you need to save money and smartly invest it.
Rule No 2 - Pay Yourself First
This rule says that you should save at least 10% of your income. If your income is Rs 10000 then you must save Rs 1000 as soon as your salary arrives.
Paying yourself first does not mean using the money to buy things. Paying yourself means you save money as soon as your salary arrives and use the money to learn new skills so that you can increase your income or invest that money wisely.
When you make a habit of saving money then gradually increase the amount you save. If you will not pay yourself first then you can never become rich in your whole life.
Rule No 3 - "If You Can't Buy Anything Thrice, You Cannot Afford It"
This rule states that if you can't buy one thing thrice at the same time, then you can't afford that thing. Maximum people spend money on those things which they cannot afford.
To understand this practically let's take an example: If you are going to take a car worth five lakhs, then you must have at least fifteen lakhs in your account. If you don't have fifteen lakhs in your account then you can't afford that car. If you are taking a car on EMI then you are making a huge mistake.
Rule No 4 - Understand The Difference Between Need And Want
Needs are those things that are necessary for your survival. Eg- food, clothing, shelter
Wants are those things that are not necessary for your survival and you spend money on them uselessly. Eg- costly phones, costly cars, etc
Nowadays there are some wants which have become our needs like mobile phones and the internet. Therefore to recognize something is a want or a need you can wait for 1 week or a month without buying that thing. If after 1 month you feel that you need that thing then buy it otherwise not.
And remember don't take anything on EMI because if you will take something on EMI then you are paying a larger amount to buy that thing.
Rule No 5 - Build A Passive Income Source
Passive income means you are earning money without doing any work or by doing very less work.
Some passive income sources include - Renting A House, Investing, Business, and Blog Etc all these things are good source of passive income but remember all these things take some time at the initial stage but once it is built you can earn money with very fewer efforts.
You should have a minimum of 3-4 passive income sources.
“If you don't find a way to make money while you sleep, you will work until you die.”
Rule No 6 - Make Assets Not Liabilities
Assets are those things that put money in your pocket like business, investment, etc whereas liabilities are those things that take money out of your pocket like EMI's.
You should focus on building assets, not liabilities. Rich people buy assets and poor people buy liabilities. When your salary comes, invest it in assets, and the income that comes from assets, use for your expenses and liabilities.
Rule No 7 - Make Money Work For You
It is a fact that 90% of the world's money is owned by 10% of the world population whereas 10% of the world's money is owned by 90% of the world's population.
This means that you should have to find a way to increase your money while you sleep and the best option is investing. You can invest your money in the stock market.
The stock market involves risk but with proper research and knowledge, you can eliminate the risk and earn a lot of money over a long period with help of Compounding.
Warren Buffett, Rakesh Jhunjhunwala, Peter Lynch, and Radhakishan Damani are some of the famous names who have earned a lot of wealth from the stock market.
Rule No 8 - Follow 50-30-20 Rule
It is a very powerful budgeting rule. If you do not know how to spend your monthly income, then 50% of your money should go towards your needs.
It could be your EMI, rent, food, and clothing expenses. All those things which are necessary for you to live life should be within 50%. Then 30% goes towards your desires. It could be a phone, vacation, EMI for your car, whatever is it that you wish to spend money on, because what fun is it if we just keep investing, and then we have money only when we are old, and we could not do anything in our youth.
So you have to spend money, spend it wisely, and that is why 30%. And 20%, a minimum of 20% should be invested every month. So, 50% towards your needs, 30% towards your wants, and 20% towards your investments.
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