Dear FutureMoneyTrends.com Member,
Each week, I try and give you our very best advice when it comes to money – specifically, personal finance. Our core objective is to help our members optimize their portfolios and lives for the future. I want to share 3 money habits that have been critical in my own life. It’s important we discipline ourselves to mimic the actions of the people we want to become, with a daily mindset that eventually becomes a habit and a lifestyle.
1) Going back to a book I read as a teenager, The Richest Man in Babylon, habit #1 is paying yourself first. It’s the act of setting aside at least 10% for yourself. It can be a start over fund, emergency account, or opportunity money. The end use doesn’t matter – what does matter is that you do it no matter what, and you save first, prior to disbursing income anywhere else.
Understand that the money will be spent. Whatever you have left will find somewhere to go. So it is important to set aside the 10% immediately, and habitually. A tenth is just a good starting point, but ultimately, you want to save 1/5th of all you earn.
2) Doing nothing. This is something I didn’t fully appreciate until I met with Jim Rogers, a famous investor in the 1970s whose fund saw an over 4,000% return. He told me how he himself mastered the skill of doing nothing, just being patient, until an investment was just absolutely obvious.
Later in life, Rick Rule, another legendary investor, told me to always remember that cash is a position. And that by holding cash, if an asset you like falls, it’s as if you shorted it. Since you chose to just hold cash, now you can buy more of the investment at a cheaper price. As with all successful investors, patience is a constant theme amongst them.
On the flip-side, if you ever feel rushed into an asset, as in if you don’t buy it today, you’re going to lose money, it’s usually a sure sign of the opposite. Being rushed means you’re more likely to lose money.
3) Invest in what has been making you money! In areas you know well. Wall Street has done a great job in conditioning everyone to think they need to be in the market, and they need to diversify. Think of all the money you have made… how about investing into that! If it’s your job, that’s okay. Look into starting a side business, or invest in companies that are in the sector.
Stick with what you know and can understand. You don’t have to own any stocks, for that matter. Buy real estate, private businesses, or just hold some cash and gold. Never feel like you have to be in a certain asset class.
I speak with real estate investors who make millions that want to enter the stock market. You know what I tell them? Instead of trying to speculate in stocks part-time, why don’t you buy property, because you seem to be pretty good at it.
Summary: Save, do nothing until you are certain, and invest in what you know. Never feel like you have to diversify into investments you are unfamiliar with.
One of the greatest advantages of the rich is the feeling of the ability to be patient. Because they are already wealthy, they can just save and invest in the obvious. Ultimately, you will be very wealthy by mimicking this approach, regardless of your current net worth.