Ever wondered why the rich stay rich and makes them tick? If you have been both curious and oblivious to the fact how money is managed, I think you should think again. Because its not that difficult once you know how money works. But hey!! Once you have it, you have to build on it right? So if you want to achieve that ever elusive financial liberty, here are the 7 things you need to know about money. You might want to try these methods in your daily life.
"Too many people spend money they earned..to buy things they don't want..to impress people that they don't like"
- Will Rogers
Lesson 1. "Money = Freedom"
Bored from your job? (dull face) Want to visit someplace new? Or want to start a new business venture? (exicted now??) Sending your children for college? (pretty expensive). Now what I mean here is that money can't buy freedom but it enables you to choose, to choose between what and when you want to do. Assuming you are focusing for a business venture, you now have the option to pick some of the best resources, get the best locations and put your contacts to good use. Oh, suddenly you fall ill, get the best medical supervision. A successful Canadian businessman said this, "Money equals Freedom." Hope you understand this.
Lesson 2. "Say no to complex investments"
If you're smart enough, you know what I mean. Time and again I was told that complex is cool, but after n interactions with some of the most smart people I have come to realise that the rich avoid complex investments. Hedge funds (ring a bell?) Cuz of risks you can't overly control. Not to mention the pricy buy-in fees. So if you don't understand the risks and can't have much control on this, no point going into this.
Lesson 3. "A thing called as an asset"
Don't hate me for being direct but rich don't invest in cars, clothes and exotic items. Because they understand which are appreciating assets. Assets be stocks, bonds or property. Their value is usually going to increase with time. Put your money on such assets.
Lesson 4. "My worth and your worth"
When it comes to money, nobody knows the answer to this question. How much is too much? Ofcourse money can buy you everything except family, friends, love and happiness. The rich have a profound awareness that Financial success is not usually related to self-worth. In the next 10 years who do you want to become, a man with a billion dollars sitting all alone or a man who gets to spend quality time with his family and friends? Choose wisely.
Lesson 5. "Making money while not spending"
While MBA classes will teach you the concept of cost cutting and what better way to practice while you cut down on your expenses in one area of your life. This is by far the best things I myself practice on a daily basis. Cutting down on one area enables you to save for another. Which means you have some money right (for your next investment/building new assets)? Think about it, cutting your travel expense from a flight to a train may help you in building funds for your next venture. A step towards it at least.
Lesson 6. "Search for Investments everyday"
The main difference between the rich and the ones who are not is that the rich are constantly thinking about the future hence they are on the lookout for investments. They never like to miss such opportunities. Part of being successful is being able to listen to all kinds of advice given to them. Be it on food, or the latest .com shopping site, or the best pastry of the corner pastry shop. They hear everything carefully. This makes them adept at spotting such opportunities, and once they do, things usually work out the way they want it to.
Lesson 7. "Diversification is the key"
One of the most pivotal differentiator for the rich is their portfolio. If you look at the portfolio (not relating to Bhardwaj's anti-portfolio mentioned in the TVF Pitchers) of a strong investor, you would most likely see a gamut of stocks, bonds from oil, food, tech and not all of them from the same sector. So its important to have pockets in different sectors, not just different companies in same sectors. This in turn would be a very wise investment plan. If someday one fails, you still have your investments protected from other sectors. Hence, it would be foolish to keep all the eggs in one basket. If the basket supposedly fell one day, then ohh?? (Ohh No..)
Start making these little conscious decisions and see the difference.