The Eight Rules of Money

Who is the fastest self-made billionaire ever?

While it took Warren Buffet 55 years to join the billionaires club, Jay Walker literally did it in less than a year. He launched priceline.com during the DotCom Bubble and his net worth instantly jumped from zero to billions. However, it was not sustainable because when the bubble burst, his net worth crashed as well, while Buffet is still on top of the list, and he does not seem to go anywhere anytime soon. That is the kind of wealth you would want to build. 

The game of money is not easy - it's tough, competitive and ruthless. And if you do not know the rules, you will fail. The problem with most people is that they might work hard their entire lives but still end up poor at the end of the journey because they do not know how the game works. So if you want to find yourself on the other side of the coin, you better master the rules first.

1. Money does grow on trees

I am sure that many of you have been taught the opposite truth but the reality is that if you operate from this perspective, you will forever be poor. You cannot trade your time for money your entire life. That is why you need to plant trees that will generate money for you when you are not there. 

It is not as easy as it sounds. Do you know how difficult it is to plant a tree? First you need to plant the seed, but the seed is useless if it is not planted in nutrient-rich soil. The tree isn't going to grow by itself. You need to water it and take care of it, and it's definitely not going to grow overnight. Some trees will take 10 - 30 years to grow. However, once it grows up, it will keep producing fruits with minimum effort for you to nurture it. The same goes to assets. Once you have build up a business, or save up enough to make a good investment, it will keep generating income even if you are not physically there. Bear in mind that at some point, you might get old or sick, and you won't be able to sustain your job. So, even if you are earning RM 2000 - 3000 an hour, you could become poor again, instantly, if you have not planted enough trees in your garden.

2. There is no limit to how much you can spend

I remember when I just started working, I was earning RM 6000 a year. I was always on an extremely tight budget and could not save enough at the end of every month. I used to think that if I could make even slightly more that I did that time, I would be able to save more. However, I ended up spending more. In fact, when I started making multiple times more, all that happened was my expenses kept getting higher. 

If you do not budget and discipline yourself to stick to the budget, you won't be able to save money to even invest. There are infinite ways you can spend. So, instead of constantly pushing that investing line higher and higher, discipline yourself to stick to a smaller budget. Elon Musk could survive on a dollar a day in the US, you will definitely survive with a few hundred dollars, or Ringgit every month.

Don't get me wrong. You can enjoy the money you have earned with your hard work, travel or to do whatever you desire, but stick to a budget that is lower than your income, and that is aligned to your financial goals.

3. Money is a life long game

When I got serious about money and investing, I have had this image in my mind that when I start making so and so, I would not need to stick to a specific budget, and I will finally retire and could enjoy the fruits of my hard work. In reality, it will not always be enough and will desire for more. In fact, if you stop managing it, it will stop generating income. 

Just because you have purchased a house, does not mean that you will instantly find tenants. If you don't take care of it, it might even turn into a liability. The idea where you create an asset and literally do nothing is just nonsense. Even if you build a successful business, you will have competitors who will try to take you down every single day. 

So, forget about the idea of retiring. Of course, you can automate some of your duties to decrease your working hours but in general, the game never ends as long as you are living. As a clear example, look at the world's richest people who continue to work even if they do not have to.

Among the richest: Jeff Bezos, Bill Gates, Warren Buffet, Mark Zuckerberg, Larry Page, Carlos Slim

4 Money will not solve your insecurities

We all have insecurities in some form. A lot of time, we buy that expensive car, or move into a bigger house, or buy a newer phone, because we wanted to be accepted or admired by society. That expensive car will make you feel good for a week or two, but then it will become normal, and your insecurities wo not go away. So, you would want a better and more expensive car. It's a never-ending cycle that keeps people who make a lot of money, poor. 

If it is acceptance you are looking for, then learn how to better manage your emotions. The truth is that your insecurities will drain your bank account but will hardly go away. Instead, improve your social skills and learn how to boost your confidence. I'm not saying you should not buy an expensive car or a private jet. Go ahead and buy whatever you desire, but do not do it to fill your insecurities. There are far better and cheaper ways to do that.

5. Do not let anyone know that you have money

We love to brag about how much money we make. At the end of the day, in the age of capitalism, that is what define your social status, at least that's how most people think. But the problem is that money is like magnet. Suddenly, people will be nice to you because everyone want a piece of it. Of course, it will make you feel good and respected, but that will come with a price that is not worth it. If they cannot get it in a nice way, they will sue you and get it the hard way. That's the reality we live in. Therefore, even if you make millions a year, do not let anyone know! Stay humble, do not brag about it and keep making more.

6. Greatest wealth transfer happen during crises

When the economy crashed in 2008, the unemployment rate skyrocketed because companies could not keep paying the bills. Millions of people became jobless, homeless and poor. However, some people aggressively began investing and became much wealthier after the crises because the biggest wealth transfer take place in crises. If you are ready to grasp the opportunity, you can become an overnight success. Remember. Jay Walker whom we talked about at the beginning, who joined the billionaires club in under a year, took advantage of the dot com bubble. Although his wealth wasn't sustainable, he still managed to keep hundreds of millions of dollars. Another example is Mark Cuban. He once said, you have to be lucky to become a billionaire because if it wasn't for the 1998 financial crisis, he wouldn't be a billionaire.

Instead of looking at the financial crisis as a hoax created by the government or the one percent to rip off the poor, take advantage of it as they do. Understand how the system works, study the past crises to understand how and why they start and be ready to be on the receivable side when the next one takes place.

7. As you get older, your expenses will grow

Have you realized that every single year, one way or another you spend more and more? When I was a teen, I could buy a pack of noodles for RM 2.50. Today, it costs more than RM4. And as you get older, your expenses will just keep increasing. That's the nature of our lives, especially if you start a family. Most people do not bother themselves about the future because they are making a decent amount of money today, but when they reach to a point when expenses exceeded their income they start complaining that they do not make enough to invest. So, if you do not make sure that your income is increasing every year, soon you will trap yourself in paycheck to paycheck cycle that will keep you poor for the rest of your life. And that's why you need to take the next point seriously.

8 Wealth accumulates gradually

As you can't grow a tree overnight, you can't grow wealth overnight. Remember, the earlier you invest, the better. With the power of compounding, you can become rich even with RM100. No wonder the world's greatest investor started investing at the age of 11. What were you doing when you were 11?

Here is a fun fact. You can make your grandchild a millionaire just by investing RM1160 which is equal to the price of a new smartphone, because in a 100 years without a single additional investment, it will grow to over a million dollars. You probably won't live that long but I'm sure your grandchild will be thankful. Let's say he won't be greedy and will keep it for his grandson for another hundred years, it will grow to almost a billion dollars. Of course, it's pointless to wait for so long but the earlier you start, the faster you are going to a position where you will be making enough to not worry about your bills again. It took Warren Buffet 55 years to make his first billion and just another 3 years to make his second billion. In fact, he made 98% of his fortune after his 55th birthday, because of the power of compounding.

In conclusion, these are the 8 rules of money that you should keep in mind if you want to be financially free. So what's your favourite one out of these eight? Let me know in the comment below.