A question I'm often asked is, "What are the golden rules? The laws to live by when it comes to money?" This is a snippet taken from my book, "Legal Tender".
The seven golden rules of money
1. Spending money to show people how much money you have is the surest way to have less money – The first golden rule of money is that wealth is the stuff you don’t see. It’s the cars not purchased or the jewellery forgone. Money buys things, but wealth – assets such as cash, stocks, bonds, in the bank, unspent – buys freedom and security. Pick which one you want.
2. Wealth is relative – The easiest way to judge how well you are doing is to compare yourself to people around you. You’ll realise that feeling rich is just a mental game.
3. The goal of investing isn’t to minimise boredom, but to maximise returns – Successful investing is pretty boring. Its main requirements are patience and inaction. Most people demand more excitement, so they tweak their investments as much as necessary to destroy as much of their wealth as possible.
4. The only way to build wealth is to have a gap between your ego and your income – Getting rich has little to do with your income and everything to do with your savings rate. And your savings rate is just the difference between your ego and your income.
5. The most valuable asset you can have is a strong propensity not to care what others think – Most people are bad with money, so being good means doing things differently from others. You won’t spend as much. You’ll invest differently. You’ll grow wealth more slowly perhaps. This may make you look like a fool to some people in the short run, but don’t worry.
6. Spend more time studying failures than successes – You can learn more from the person who went bankrupt with a mortgage than you can from Warren Buffett. That’s because it’s easier and more common to be stupid than it is to be brilliant, so you should spend more effort trying to avoid bad decisions than making good ones. Learn from other people’s mistakes.
7. Anything can happen at any time for any reason – You might be asked to leave the partnership next week. Or win the lottery. Maybe your health will be challenged. Shares can rally for twice as long as you think and crash twice as fast as you assumed. History is one damned thing after another, most of it involves money and there’s nothing you can do about it. So try to focus just on the things you can control.
Source - Housel, M. (2014, September 26). Iron Rules of Money. Retrieved October 5, 2014, from The Motley Fool: www.fool.com/investing/general/2014/09/26/iron-rules-of-money.aspx.