by Let’s be honest. There’s not many of us here who’ve ‘made it’ financially. You should give yourself a Bells if you just made it through December without getting into debt.
We get it. It’s hard enough figuring out how to manage your finances in general and here we go suggesting you do it like a billionaire. For all we know, you’ve filed the word ‘billionaire’ right up there with ‘seeing a unicorn’.
How To Manage Your Finances To Become (And Stay) Wealthy
All wealthy people started somewhere at the bottom. Okay, not Donald Trump. But, look at Oprah. One thing we can tell you about both of them, is that they weren’t earning money just to ‘burn’ money, as the saying goes. Or they wouldn’t be wealthy anymore. They started with a plan, and a few principles.
Four Financial Management Principles From Billionaires
1. Invest, Don’t Consume
Tony Robbins, international self-help expert, interviewed 12 well-known billionaires in his first book on money, MONEY, Master the Game: 7 Steps to Financial Freedom. At the core of the advice is making the decision to become an investor and not a consumer.
According to the book, less than half of America have money invested in stocks, but 61% of Americans buy at least one Starbucks coffee, everyday. Sounds a lot like our savings culture in South Africa.
2. Take Action
We all can get a little overzealous with our New Years resolutions. But, come January, that list can be a little intimidating. Like in all areas where you want to see progress, taking action is the first step in investment success. Even if that step is not buying anymore coffee.
Oil tycoon, T. Boone Pickens, says, “Too many people say, ‘Ready? Aim! Aim! . . .’ But they never fire”.
3. Start Small
“The goal of the nonprofessional [investor] should not be to pick winners … but should rather be to own a cross section of businesses that, in aggregate, are bound to do well,” says Warren Buffet.
Buffett, considered one of the most successful investors in the world, is in good company recommending low-cost index funds, like our Satrix 40 in South Africa. Index tracking funds are regularly recommended by some of the wealthiest people in the world, including Charles Schwab, John Bogle, and Charlie Munger. They all agree that, for the average person, low-cost index funds are the best way to invest.
The Little Book of Common Sense Investing quotes Buffet: “By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals”.
4. Save
Entrepreneur asked Mark Cuban for his best advice on how to make money by investing. He replied, “Don’t.”
Contrary to what most investors tell you (that risk is the way to go), Cuban advises you have that money or that savings “in the mattress … so you’re protected in case something goes wrong”. And by mattress, he means an easily accessible, but untouched savings account.
Cuban advises, before any investing takes place, that everyone gather a six-month emergency fund. That’s six months worth of living expenses in case of an emergency.
“I know it doesn’t earn much in the bank, but you’ll sleep a lot better,” says Cuban.
