Stupid Simple Money Rules

Here's a fact you might not be aware of: the moment you walk out of the door of your apartment, everybody is looking for one thing: to sell you something and take away your money. And make no mistake, if you don't take great care of your money and make an effort to protect it, those dollars will eventually slip through your fingers.

But what if we told you there are ways to safeguard against that? Well, here are 10 stupid simple money rules that you need to follow.

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Number one: Sit on enough cash, but pay attention to inflation. You know, there was a time when most currencies used to be backed by gold or other precious metals and proudly held their store of value pedigree. But those days are long past. In fact, holding all of your wealth in cash is a very stupid idea because of a sneaky but dangerous phenomenon called inflation.

Most people have a hard time understanding how inflation actually works, but we'll apply the "explain it to me like I'm five" rule. So, in general and in simple terms, inflation refers to the general increase in prices of goods and services over time. In other words, the value of your money decreases as prices rise.

Inflation is a crucial factor to consider when it comes to personal finance because it affects the cost of living, the value of your assets, and the performance of your investments. So, for example, let's say you've got ten thousand dollars in a savings account that pays a one percent interest rate per year. If the inflation rate is three percent, the purchasing power of your savings will decrease by two percent every year.

This means that you'll lose money in real terms because the interest rate you earn is lower than the inflation rate. So yeah, holding money in your savings account during high inflation times is kind of like scamming yourself. And that's not even to mention the fact that you usually have to lock your money in for extended periods of time in order to benefit from a high interest rate of one percent.

So, paying attention to inflation is important when deciding how much cash to hold on to and how much to invest. You need to learn to strike the right balance, which can be hard without proper financial education. It's important to consider the fact that life is not linear, meaning you might need some cash on hand to handle unexpected expenses and emergencies or even make a big purchase without taking on debt. Understand this, and you'll be ahead of most people in terms of wealth management.

Number two: Figure out your risk tolerance. In the world of finance, risk tolerance refers to an individual's willingness to accept potential financial losses in pursuit of higher returns. It's an essential concept to understand because it can greatly impact one's investment strategy and overall financial well-being.

To determine your risk tolerance, there are several factors to consider. First and foremost is your investment goals. So ask yourself, what are you hoping to achieve with your investments? Are you looking for long-term growth, or are you more interested in preserving your capital? Knowing your investment goals will help you to determine how much risk you can afford to take on.

Another factor to consider is your investment horizon. This refers to the length of time you plan to hold on to your investments. If you have a longer investment horizon, you might be able to tolerate more risk because you have more time to ride out any short-term losses. On the other hand, though, if you have a shorter investment horizon, you may need to be more conservative with your investments.

Your current financial situation is also an important factor to consider here. How much debt do you have? Do you have an emergency fund in place? Because these factors can impact how much risk you can afford to take on. And finally, your personal feelings about risk should also be taken into account. How comfortable are you with the idea of potential losses? Are you willing to take on more risk in exchange for potentially higher returns, or would you prefer to play it safe?

What you'll find here is that depending on your age, your risk tolerance can be higher or lower. Remember, high risk moves are for young people or for those with a fat bank balance, whereas YOLOing, that's for fools and gamblers.

Number three: You're paid what you ask, not what you're worth. If you're waiting for your boss to offer you a raise out of their goodwill, think again. That's not how capitalism works. Meritocracy is just a buzzword. It can be easy to assume that the value of your work should be reflected in your compensation, but unfortunately, that's not always the case.

This is because the total value we bring to an organization is subjective and difficult to measure. But here's how you fix that. In many cases, individuals who are confident and assertive in salary negotiations are able to secure higher compensation, even if they may not necessarily bring more value to the organization than someone who is less assertive.

This is why it's important to develop strong negotiation skills, as they can help to ensure that you're paid fairly for your work. However, it's important to note that the phrase "you're paid what you ask, not what you're worth" should not be taken as an invitation to demand unrealistic compensation. Ultimately, your worth to the organization should be reflected in your compensation, and it's important to do your research and make a thoughtful, well-supported request during salary negotiations.

Number four: You don't need to be a millionaire to live a millionaire lifestyle. Some people call it “fake it till you make it,” while others call it “being smart.” In any case, here's how you can live a millionaire life without actually spending like a millionaire.

For example, it costs hundreds of thousands of dollars to buy a Lambo, and the costs quickly add up once you take into consideration environmental taxes, maintenance fees, and fuel. Unless you've got unlimited money, this kind of buy is a liability, not an asset. Look, we perfectly get it okay? We also like expensive toys—like, a lot, actually. So if you're not insanely rich, a better idea is to rent a supercar or a yacht when you want to have some fun instead of buying one. It's far safer, certainly not a financial burden, and it always allows you to live like a millionaire from time to time.

Number five: Earn internationally but spend in your local currency. Freelancers should already know this, but we'll share the secret anyway because many people are unaware of this. Earning in a foreign currency and spending in your national currency can be a smart financial move for a few reasons.

Firstly, if you earn in a currency that is stronger than your national currency, you might be able to increase your purchasing power. For example, if you earn in US dollars and live in a country where the local currency is weaker, you might find that your earnings go a lot further when converted to your national currency. This can allow you to save money, invest in assets, or even afford a better standard of living.

Secondly, earning in a foreign currency can offer protection against inflation and other economic uncertainties in your home country. So if your national currency experiences high inflation or other economic issues, it can significantly decrease the value of your savings and earnings. Moreover, earning in a foreign currency can diversify your income stream and provide a source of stability during uncertain economic times. If your national currency experiences a downturn, you might find it challenging to find work or maintain your earnings. Having income in a foreign currency can provide an additional safety net and help you weather those economic storms. This is especially true for people living in developing economies. If you leverage this to your advantage, you can certainly make the most of your money. Just make sure you're respecting the law.

Number six: Pay yourself first. This is not true in business, but it should be a golden rule in your personal life. The philosophy behind paying yourself first is rooted in the idea that prioritizing your own financial well-being is essential for long-term financial stability and success.

When you pay yourself first, you allocate a portion of your income towards savings or investments before paying any of your expenses or bills. This approach is often recommended by financial experts as a way to build wealth and achieve financial independence. By making savings or investing a non-negotiable priority, you're more likely to consistently set money aside and avoid the temptation to spend it on non-essential items. Just make sure you budget properly.

Number seven: Use credit to your advantage. Using credit to your advantage involves understanding the benefits and risks of credit and using it responsibly. Smart people use credit in several ways, which includes building credit, taking advantage of rewards, and financing larger purchases in assets.

Building credit is important for obtaining loans and other financial products with favorable terms and interest rates. Credit cards with rewards programs can also earn you some cashback, points, or air miles. You could use credit cards strategically to maximize rewards but pay balances in full to avoid accruing interest charges. Smart people also use credit to finance larger purchases, like a car or a home, but they do so cautiously.

They research their options, compare interest rates, and negotiate their terms. They also avoid excessive debt by using credit only for necessary expenses and keeping their credit utilization ratio low.

Number eight: Budget literally everything. Budgeting has several advantages that can help you to achieve your financial goals. Firstly, it provides a clear picture of your income and expenses, allowing you to make informed decisions about where to allocate your money. This helps you to prioritize your spending and to avoid overspending.

Secondly, budgeting helps you to save money by identifying areas where you can cut back on expenses. Thirdly, budgeting can help you to avoid debt by ensuring that you have enough money to cover your expenses and debts. Finally, budgeting can reduce stress and anxiety by giving you a sense of control over your finances and helping you to plan for the future. And all of this lies in your ability to stay disciplined.

Number nine: Spend less than you earn. Spending less than you earn is, of course, a good idea because it enables you to save money and build wealth over time. When you spend less than you earn, you've got money left over that you can use to pay off your debt, invest, or save for the future.

This can help you to achieve financial goals, such as buying a house, starting a business, or retiring comfortably. Additionally, spending less than you earn can help you to avoid debt and financial stress, as you're living within your means and not relying on credit to make ends meet. Overall, spending less than you earn is a key component of financial stability and long-term wealth building.

Number ten: Do tax avoidance, not cash evasion. Tax avoidance is a legal practice used to minimize tax liability without engaging in tax evasion, which is illegal. It involves using legal tax strategies, such as taking advantage of tax deductions and credits, investing in tax-deferred retirement accounts, and structuring business transactions in a tax-efficient manner to reduce the amount of taxes owed to the government.

Now, while it's legal, there is a debate over its ethical implications. Some argue it's not fair to society and contributes to inequality, while others view it as smart financial planning. Ultimately, whether you engage in tax avoidance or not is a personal decision, but it's important to be aware of the legal and ethical considerations and to seek the advice of a qualified tax professional when making tax-related decisions.

And they lock serve. That's all we got for you today. We hope you enjoyed this video as much as we did making it.

With that being said, we're curious to learn: what is one simple but efficient money rule that you follow religiously? Drop your answers in the comments below; we are always so curious to hear your thoughts. If you found this video valuable, hey, don't forget to return the favor by tipping us with a like and a share.

And as always, thanks for watching. If you'd like to learn some more, check out this video next.