One of the greatest books ever to cover the subject of money and how to build wealth is the richest man in Babylon written by George S. Clason. The rules he writes about are incredibly simple to implement, and with time will generate equally incredible results. These financial rules is really what separates the poor, that lives from paycheck to paycheck, from the wealthy that have reached financial freedom and have created a constant and never ending stream of income, largely because they’ve made decisions based on these methods which I’m about to explain. This are the seven rules that will inevitably make you filthy rich.
The first and most important rule is, a part of what you earn is yours to keep. Don’t make the mistake that too many poor people make, which is to spend first and save later. Because there will be nothing left for you to save and invest. If you are serious about building wealth and becoming economically independent fast, then the first thing you should do is to save at least 10 %. Before paying your bills or buying useless shit, make sure to save at least 10 % of what you earn. I’ve made a video where I go into this more in debt that you can watch here, because this is the foundation to wealth.
The second rule is to control your expenditures. The best way to AVOID building wealth is to have as much expenses as your income. That’s unfortunately an extremely common reasoning among poor people and a brilliant idea if you want to avoid becoming rich. As I stated earlier, do you really need to buy expensive useless shit every single month? If you think you will have trouble getting by each month because you save 10 %, then you’re not serious about building wealth. Cut your expenditures, stop buying useless things just because you can and save that instead. You might realize that you can actually save a lot more than only 10 %, and you are now ahead of the curve to reach financial freedom.
The third rule is to multiply your money. The money you have been able to save following the previous rules, should now be invested. Make that money work for you all hours round the clock and invest it wisely. I’ve covered this subject in another video where I explain the methods used by top 50 investors around world that I picked up from Tony Robbins in his book money master the game. But you essentially want to diversify your risk, not the assets attached to the risk. I recommend the all weather portfolio by Ray Dalio. This portfolio and its asset allocation is, after thorough testing and with Tony Robbins own words, “invincible, unsinkable and unconquerable”. I go through the percentages for that portfolio along with other important rules and steps which you can watch here.
The fourth rule is to protect your money. Warren Buffett’s number one rule is to not lose money. If you lose 50 % of your investment it takes 100 % to get back to even. As you begin to acquire more money, you will have temptations to make riskier investments in order to make more money faster. This is more than often a bad call, and can bring devastating results. Make sure your investment is secure and avoid loaning or dealing in the private sector. Eliminate the element of risk and instead invest it in indexes such as the S&P 500. Don’t trust brokers or mutual fund managers that promises to beat the market, because 96 % of actively managed mutual funds fails to beat the market over any sustained period of time, according to Money, master the game. “The market” is referring to a stock index, such as the S&P 500. Again, the wisest thing to do is to invest in an index, don’t try to beat it.
The fifth rule is to own your home. Avoid renting your home as that’s only beneficial for the short term. And as with everything financially, make decisions for the long term, be patient and let time do its magic. When you rent a home, you’re paying for something that you will never own and you will only live there temporarily. However if you take a loan to buy a home, with every payment you reduce the loan and you will eventually own the home completely. If you don’t want to live there anymore, you have the capability to sell it. Which is something you lack if you’re only renting it.
Rule number six is ensure a future income. Have a separate savings or investment portfolio that you will not touch until you’re ready to retire. Add a little bit och cash to it every month and it will yield results for many years. It’s kinda like your own personal 401k, that you have full and complete control over. Don’t let your government have full responsibility for your future earnings, but make an effort to create your own. Then reap the rewards of having both.
The seventh and last rule is to increase your earnings. Increase your own quality and worth in your field. Invest in yourself and learn as much as possible. The highest earners are the ones who work on themselves equally or more than they do on their job. Apply the law of three (VID) and you will be on your way to increase your income at any age, in any field. You can watch my video on the law of three here. The law of three will help you double your productivity, performance and output within twelve months, and sometimes even within the first month.
Combine all of these rules for the ultimate effect, and you’re on the highway to becoming financially independent. You can get the book on Amazon here.