If you could go back in time and give yourself financial advice, what would you say? My longtime followers will know that when I was thirty, I lost everything. It’s only because of the skills I learned as a result of that experience that I was able to put myself in the epic financial position I find myself in today. In this episode, I reflect on the things I wish I’d known about money before that fateful year and whether or not they would have led me to where I am today, or even beyond.
- Take big risks
Losing money is not that bad. If you’re taking enough smart risks, chances are, you only need one of those to pay off to make up for those that fail. And you’re going to be much better off with that one success than if you had held back from taking a risk at all. You can recover from bad investments, but you will never win back invaluable missed opportunities. Follow your gut.
- Embrace compounding interest
In order to balance out those risks, plan on taking advantage of the power of compounding interest. The average return on a simple index fund is around 11%. If you put $5000 away when you are 18 years old, without touching it, it’ll be $10k at 25. That same $5k will turn to $320 grand by the time you’re 60 years old without adding to it. Imagine what would happen if you kept making regular contributions. The power of compounding interests has to be a part of your wealth plan.
- Your home is not an investment
I know this one is controversial, but it’s true. Now, I’m not saying don’t go out and buy a home if that’s your plan. I’m a homeowner. I value having a home. But don’t fall for the trap of rushing out to buy a home as soon as possible, and don’t think of it as an investment. It’s not an investment, it’s a home.
- Relationship capital is your greatest asset
Money is great when you have it. But when you don’t, relationships are what matter most. Your network can introduce you to the person, or idea, that changes your life. It’s those relationships that can help you start a new business if things go south. Take it from me, having the right people in your life is worth more than any amount of money.
- Multiple income sources are a must
No matter what you are doing to make money today, nothing lasts forever. You can’t count on one income stream forever. Focus on multiple sources, especially passive income. Make sure at least one is directly under your control. Be assured that, if one source goes away, even your largest, you would not be forced to change your lifestyle.
- Ego is your greatest overhead
Nothing will cost you more in life than your ego, not bad investments, not missed opportunities – nothing. Ego is the biggest reason most people don’t follow these six rules. It causes you to tank relationships, spend money frivolously instead of investing it, put all your money into one basket, and worse.
I wish I could go back and teach myself these principles. It’s never too late, even for me! Start now and set yourself up for long term financial success by avoiding these easy pitfalls.
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You’re Going To Hear About:
- Taking big risks
- The power of compounding interest
- Why your home is not an investment
- The importance of relationship capital
- Rules for multiple income sources
- Parking your ego
- Text DAILY to 310-421-0416 for a free money mantra every day