7 Financial Rules You Must Understand Right Now Although only a small portion of the world’s population is born with a silver spoon, if you are one of the large groups of people who weren’t born into wealthy families and you are serious about getting wealthy then I urge you to stay with me because in this article I will show you how to create multiple streams of passive income.
There are many ways to make money, with the most common ways being earning a salary, generating business income, or earning from your streams of passive income. You can also get wealthy by inheriting
1. Use Good Debt And Avoid Bad Debt
Being in debt isn’t all that awful, however it depends on the type of debt you have. The main question is whether it’s good debt or bad debt first. Only a small percentage of individuals are able to pay cash for everything they need in life, including a vehicle, home, and a college degree.
what is good debt
An investment might be deemed to be good debt. The goods you obtain through excellent debt typically improve in value or provide revenue over time. A student loan is an example of good debt. A student loan will cover a student’s tuition costs and other educational expenses throughout their time in college. The loans are repaid once the student has graduated and found a job that pays a salary. They have very little interest and increase the value of the borrower by preparing them for future employment.
Another good debt example is a mortgage. The interest on a mortgage is tax deductible, and because payments are spread out over a long period of time, you’ll have the chance to use the cash you have on hand to invest in other ventures. You could even rent out a portion of your home and make some money from it while you’re still repaying, and don’t forget the chances of property appreciation.
Bad debt
currently, though, there is terrible debt. Bad debt is incurred to pay for products that depreciate quickly and do not produce revenue over the long term. Its excessive interest rates are another hallmark of bad debt. Smart individuals approach bad debt with a straightforward set of questions: Can I afford it? Do I truly need this item? If not, why should I pay so much interest on something I don’t actually need? Here are a few instances.
First, there’s acquiring bad debt to keep up with your peers, also known as consumer debt, for example, let’s say you use a credit card to purchase a high-end handbag that costs you $1,000 over time. If you are unable to pay off that debt, the interest will keep rising while the bag will eventually wear out, go out of style, and lose value, costing you more than $1,000 in total.
Payday loans and cash advance loans are two more examples. In summary, debt isn’t always bad, but not all types of debt will help you go ahead either. These are the worst kinds of debt since the interest rates are excessively high and you will be charged additional processing fees and penalties if you can’t return the loan by the due date.
2. Capitalize on free money
Why pay for something when you can get it for free one of the best ways to have money is to save money and what better way to save money than to have access to free stuff when I talk about free money
one example are scholarships and grants a scholarship is a payment made to an academic institution on behalf of a student which is meant to cover their academic related expenses over the course of the program scholarships can be awarded by the state a corporate organization or an NGO as a reward for academic Excellence or simply as a form of Charity scholarships are not loans and the student is not required to pay back after he or she has graduated and found employment
if you’re a student about to go to college why don’t you try out for a scholarship however if you’re no longer in school don’t worry because there is a ton of free money out there in the world for you too for those in the workforce one popular way to make free money is by contributing to your employer’s 401k and receiving an employer match a 401k match is generally set up as a percentage of
an employee’s salary commonly around six percent the employer’s contribution is a certain percentage of the employee’s contribution a generous employer will match the entire employee amount making a dollar for a dollar or a hundred percent contribution other companies contribute 50 or less of what the employee pays in let’s use a worker with a salary of fifty thousand dollars as an example if she contributes six percent of her salary into the company’s 401K she will have three thousand dollars in the plan after the first year if your employer does a 100 match she will have six thousand dollars in the plan
if your employer does a 50 match or three percent of the employee’s salary she will have forty five hundred dollars in the plan either way she is receiving free money from her employer just by saving for her own retirement and if you want to achieve significant wealth then you must take advantage of free money whenever you can
3. strive to make make your time more valuable
as a popular saying goes time is money making money takes time and what you do with your time matters a lot in the Quest for gaining wealth as far as what you do with your time there are high value activities as well as low value activities high value activities are those that you do with your time that can earn you income or improve the quality of your life on the flip side low value activities are those activities that do not bring in any income and they do not improve the quality of your life low value activities steal your money instead of multiplying it
some examples of high value activities include making business plans working on client projects researching new Investments exercising and getting adequate sleep on the contrary low value activities could be gasping at the office instead of working spending long hours at the bar drinking or over sleeping in short if you want your fortunes to change for the better then engage in more high value activities
4. Commit to a Budget
This is another major rule of money if you cannot control your spending then you cannot save one of the best ways to control your spending and save is to set up an expenditure budget and stick to it you should have a maximum amount of money you can spend on a daily or monthly basis this is an amount that would be taken out of your earnings and
it should be used for your daily upkeep the rest of your earnings should be saved and reinvested many people are broke simply because they cannot commit to a budget this causes them to buy pretty much any attractive item they come across even when they don’t need it
5. it’s not how much you make it’s how much you keep
person a earning more money than person B doesn’t necessarily mean person A will be richer than person B if you earn three thousand dollars a month and you spend four thousand dollars per month it means you are in debt and you are broke the smart move for that individual earning three thousand dollars per month is to spend two thousand dollars say 500 and invest five hundred by doing this you are not only stashing money away for a rainy day but you are also investing do the math
if you save 500 per month in 12 months you would have saved six thousand dollars and that is a decent sum of money keep in mind that you have also been dedicating 500 monthly to Investments if the Investments are panning out right then you’re already on the path to long-term Financial Freedom the standard Benchmark for saving is at least 10 percent of your monthly income you can raise the bar by saving up to twenty percent of your income
if you feel you can do it it doesn’t matter if you earn a hundred thousand dollars every month if you squander it all on items that add no value then you will be poorer than the person who earns three thousand dollars and saves and invests a percentage of their money each month
6. Double Your Portfolio Every 10 Years
for you to be truly financially free you need to make your portfolio as Diversified as possible Investments are meant for the long term and when the time comes for you to start reaping the benefits have it at the back of your mind that you also need to double your portfolio take out time to study
the market you want to invest in and determine if they will be profitable or not choose the best possible stocks and add it to your portfolio if you do not have the Investor’s third eye which is used to spot profitable markets then you can hire experts to assist you in picking the right stock if you can do this every 10 years then just imagine where you would be in the next 30 years
7. Join The Profit Stream
If you’re an employee of a business and you want to break away from earning the same salary at the end of each month then it’s all in your hands what you need to do is join The Profit Stream of that business and stop depending on your salary alone trust me the business makes much more than you can imagine and your salary is peanuts compared to what the owners are making let me give you
A practical example let’s assume you work in a car sales company as an accountant and you earn a salary of fifteen hundred dollars per month do you know you can triple your earnings if you find a way to bring potential buyers to the car a lot and convert to sales you can speak to your employer about your plans tell him or her that you’d like to get more customers for the business and you’d like to earn a commission on each sale you make
they would most likely agree to your proposal since the reason they are in business is to make sales too regardless of who is bringing the buyer now let’s say you managed to sell a car worth ten thousand dollars and you’re entitled to a five percent commission that will be an extra 500 added to your existing salary this is
if you sell just one car imagine being responsible for up to five car sales in a month the commission you would make on these sales put together will be more than the salary you earn in your quest for a better financial position it is always better to be part of The Profit Stream as opposed to being just a salary yearning employee