7 Rules Of Money You Need To Know


There are several ways to make money with the most common ways being earning a salary, generating income business income or earnings from your streams of passive income. You can also get wealthy by inheriting a fortune, although only a small fraction of the world’s population is born with a “silver spoon”.

So, if you belong to the large group of people that weren’t born into rich families, and you are serious about gaining wealth, then I urge you to stay with me as I share the7 rules of money you definitely need to know!

Rule #1: Use Good Debt and Avoid Bad Debt

Only a few people are in a position to pay cash for everything they need in life. These things include a car, home, and a college education. It is possible to live debt-free, however, being in debt isn’t all that bad. This of course depends on the kind of debt you have. The real question is whether it’s good debt or bad debt.

First, what is a good debt?


Good debt can be considered to be an investment. The things you get via good debt usually increase in value or generate income in the long term. An example of good debt could be a student loan. A student loan will take care of a student’s tuition fees and other academic materials all through their time in college. It attracts very little interest, and it increases the individual’s value by preparing them for future employment. Then, the loans are repaid after the student has graduated and is gainfully employed.

Another example of good debt is a mortgage. Mortgages are typically very low-interest forms of debt that are spread out over long periods of time. Not to mention, the interest on a mortgage is also tax-deductible.

Since payment is spread over such a long period of time, you will have the opportunity to use the cash you have at hand to invest in other ventures. You could actually rent out a portion of your home and generate some money from it while you are still repaying. Let’s not forget, the chances of property increasing in market value over time are higher than the chances of reducing in value.

Now, on the contrary, there is bad debt.

Bad debt is one that a person incurs to pay for items that lose value very fast, and do not generate income in the long term. Another characteristic of a bad debt is that it has high-interest rates.

There is a simple set of questions that smart people apply to bad debt:

  • Can I afford it?

  • Do I really need this item? and

  • If I don’t, then why should I pay so much interest on something I don’t really need?

Here are a few examples:

First there is incurring bad debt to keep up with your peers otherwise known as consumer debt.

Let’s say you buy an expensive handbag with your credit card, and that bag costs you $1,000. Over time, if you are not able to repay, the interest on that debt will keep rising. Worse still, the bag will become worn or go out of fashion and lose value.

At the end, you would have spent well over $1,000 on a bag (after all the interest has been repaid), and this is an item that doesn’t add any value or bring in any income.

Another example are payday loans or cash advance loans. These are considered to be the worst kinds of debt. First of all, the interest rates are too high. Secondly, if you are unable to pay back the loan on the due date, then you will incur another processing fee, as well as penalties for late repayment. In short, debt isn’t always bad, but not every form of debt will help you get ahead either.


Rule #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 their 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/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 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 401(k) and receiving an employer match.

A 401(k) match is generally set up as a percentage of an employee’s salary, commonly around 6%.

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-dollar, or 100%, contribution. Other companies contribute 50% or less of what the employee pays in. Let’s use a worker with a salary of $50,000 as an example. If she contributes 6% of her salary into the company 401(k), she will have $3,000 in the plan after the first year. If her employer does a 100% match, she will have $6,000 in the plan. If her employer does a 50% match (or 3% of the employee’s salary), she will have $4,500 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!


Rule #3: Strive To Make Your Time More Valuable

As the 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 things 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 gossiping at the office instead of working, spending long hours at the bar drinking or oversleeping. In short, if you want your fortunes to change for the better, then engage in more high-value activities.


Rule #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 re-invested. 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.


Rule #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 $3,000 a month, and you spend $4,000 per month, it means you are in debt and you are broke.

The smart move for that individual earning $3,000 per month is to spend $2,000, save $500, and invest $500. 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 $6,000, 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 a path to long term financial freedom.

The standard benchmark for saving is at least 10% of your monthly income. You can raise the bar by saving up to 20% of your income.

It doesn’t matter if you earn $100,000 every month, if you squander it all on things that add no value, then you will be poorer than the person who earns $3,000 and saves and invests a percentage of their money each month.


Rule #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 would be profitable or not. Choose the best possible stocks and add it to your portfolio.

If you do not have the investor’s 3rd 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!


Rule #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 $1,500 per month. Do you know you can triple your earnings if you find a way to bring potential buyers to the car lot and convert to sales?

You can speak to your employer about your plans. Tell him or her 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 manage to sell a car worth $10,000, and you’re entitled to a 5% commission, that would be an extra $500 added to your existing salary. This is if you sell just one car.

Imagine being responsible for up to 5 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 a part of the profit stream, as opposed to being just a salary-earning employee.

There you have it, the 7 rules of money. Infuse the knowledge I have shared here into your daily and business life, and you will see changes for the better.