6 Fundamental Rules of Money



Handling money is no easy task. Poverty rate around the world is the proof. Getting into adulthood, we wish that personal finance was included in our basic education. There is a lot to tackle about handling money, but here are the 6 fundamental rules of money that can always help you in your decision making.

1. Cash is King.

When planning your finances, the first thing that we should always look into is our savings. Even though you are expecting an income on the next payday, it is always safe to have available cash that can cover your expenses up to the 2nd payday. This way, you will not have to worry about money or acquire loans that are not favorable to you.

Next thing we should also consider is our cash flow. Most businesses closed due to cash flow problems. Same goes to individual, it will cause a serious problem. When cash flow is negative, it will surely drain your Cash dry. Make sure that your cash flow is always positive. As serious as it is in businesses forcing them to close permanently, it is also serious in your personal finances as it disables you to do what you want or need to do.

When it comes to spending or acquiring assets, I have 3 criteria that help me decide; a) Savings should be able to cover up to 1 month worth of expenses after the purchase, b) Savings should be at least twice the cost of what I will buy and c) wait and see if this purchase still makes sense after 7 days. If any of these criteria is met, proceed.

You may buy all your wants such as gadgets, collection items, cars and properties as long as you still have cash available. Do not make the mistake of buying something you want without enough cash left. When something wrong happens and you do not have enough cash, you will have to sell things that you need. The worst thing that can happen is when you have to sell one of your wealth machines just to cover the immediate expenses. Selling these assets will further drag you down by decreasing your cash flow further.


2. Don’t be a slave of money; make money work for you.

You have to be able to control your money, or else it would control you. Money is like a wild animal that should be tamed to be our loyal pet. We all want money, but we got to work to earn it. We have to add value in order to gain money.

Unfortunately, you can’t always chase money on your own. You only have 24 hours in a day. You should learn how to utilize money as a leverage to generate more money for you. It can come in the form of hiring labor to run your business or simply buying income generating assets.

If you have outstanding debts, make sure to pay them. As long as you are in debt, you will still feel like a slave of money. Aside from the interest rate, having peace of mind from debts will set you free.


3. The more you learn, the more you earn.

Education is the best investment with the highest rate of return there is. Investing in yourself especially in education will let you grow. In growing, you get to solve the bottle necks of earning more.

Rich people didn’t get their wealth without studying. They get more education such as Masters and PhD when their business grow. They have to grow in order for their business to grow. Even those who dropped out in college, they still take time to read and self learn. Add reading in your daily routine.


4. The harder work you do, the luckier you get.

In statistics, we learn that the more flip a coin or draw a rock from a bag, the more chances of getting our desired outcome. It is the same in real life personal finances. If you want to achieve your financial goals, you gotta work for it. Money won’t come to you without doing anything. You can’t get to Cash Heaven with just Netflix and chill all day. You can’t get lucky if you are doing nothing to get what you want. Even in winning a lottery, you’d still have to go to lottery outlets and buy tickets to be able to have a chance of being lucky. If you want to retire early, do all the hustle earlier.


5. Live below your means. Always save for the rainy days.

Do not buy anything you can’t afford. Although there is a loan that you can apply for, make sure that it will not dry your cash and cash flow. Your lifestyle should adjust to your income. Your income should always be higher than your expenses. This way, you can have savings which you can use in times of unprecendent crisis like a COVID pandemic lockdown.


6. Don’t think of money as the root of all evil.

Money can help you do anything (of course within the scope of physical limitations). Just because some bad guys amplified their evil because of more money, it doesn’t mean that it really is the root of all evil. With more money, you can also help charity and do good things.

If you don’t want money because you think it is the root of all evil, then don’t expect it to come to you. Embrace the mindset that money can be used for good things. Consider it an ally, instead of an enemy. This is how you will grow and get to your financial goals.



 

Published by Cash Heaven

Excel Expert and Financial Analyst Excel / Google Sheets / Financial Modelling, Valuation and Analysis Effective communicator / High quality / Affordable / Reliable / Quick Turnover I've successfully completed over 200 financial modelling, valuation and analysis projects with start-up stage and corporate companies over the past 4 years. I love to solve problems, have an eye for design, and have built business excel templates. I fix Excel formulas in 10 minutes.

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