Rules That Make You Rich
If you follow these rules, you can expect to be rich one day.
I'm no motivational writer, thank goodness. I can't stand the self-promoting books that are six parts motivational, three parts author ego and, if you're lucky, one part useful tips.They talk vaguely about when you'll be rich and suggest that it'll be soon. Or they throw away suggestion altogether and say you'll be a millionaire in six months. Balls!So here, I'm going to stick to the useful tips, and I can tell you that, realistically, you should set your expectations to future wealth in twenty to forty years, and not expect riches in five years. Here are 14 achievable rules that I follow myself which are already leading me to be comfortably rich.1. Balance the booksPut aside all your money-making ideas and projects until you have your finances in order. You should take in more than you pay each month. If you ignore this rule, your debts will build up faster than you can get rich, and you'll never get rich if you're stressing about debt.Remember that balancing the books includes saving for big, future expenses, such as holidays, a car and Christmas.2. Avoid debtDon't borrow unless you have to. It's no good making more money if you increase your debts alongside it. You must clear your debts so that you can earn interest on your savings, or do things even more productive with it, rather than spend decades paying off debt plus debt interest.3. Get out of debt, then save, then investWe pay more in debt interest than we earn in savings interest, so it makes the most financial sense to get out of debt first. Then you can save for emergencies and the future. Finally, when you have this safe cushion, you can invest for bigger returns.4. Work hardMost businesses fail, and the majority of investors fail to beat the market. So you are much more likely to get rich by putting extra time and effort into working hard than into spending time picking shares, or even setting up a business.We have to be realistic and, realistically, there are no easy options. There is no substitute to grafting, which will lead to higher pay (if you ask for it), you'll get noticed for promotions and you'll get good references. You should also work hard to get a better job, or a second job.5. Track the stock marketWhen you invest, track the stock market. For anyone investing for ten, 20 or 30 years, the stock market has been remarkably successful for the past 130 years. This method of investing requires little thought, but has out-performed the majority of fund managers over the long term. You can track the market using index trackers or ETFs.6. Don't fall for get-rich-quick schemesIf you receive an email, letter or phone call foretelling massive riches in no time at all, delete it, bin it, or hang up. Don't think 'But what if, this time, it's true?' because it isn't. Period!7. Don't gambleMost gamblers take a long time and spend a lot of money finding out that they'll never beat the bookies and casinos. The odds are stacked heavily against us. It's crazy to bet against the gambling industry. They know how to make profits!8. Don't buy products with the following wordsguaranteed (although `guarantee' can be OK)bondsecuredpayment protectionYou could break all of my rules and still become rich. You could, for example, gamble a few pounds every now and then, or borrow £1,000 to make an extravagant purchase, although I wouldn't advise it.However, this rule has more scope for reasonable breakages. Rule 8 is a general rule that applies to perhaps 90% of you. It's certainly a safe bet to avoid products like these if you're unsure. However, there are exceptions. Older investors, for example, might like a steady income from bonds and, occasionally, getting a secured loan is the right decision. It's just that on the whole the products with these words in have too many catches or cost too much.Remember that names change. Payment protection insurance is still payment protection insurance, even if the lender is calling it 'credit card repayment protection' or 'personal loan protection'. 9. Beware products that are advertised heavilySometimes a cheap product is advertised to grab your attention and build brand. However, in finance, this is rare. Any product that you see advertised constantly and aggressively is almost certainly an expensive product, especially if you don't use it properly. So be very cautious of those products.10. Be disloyalDon't be loyal to your bank or insurer, because loyalty is not rewarded. The financial industry is so competitive that providers will offer headline grabbing deals to newcomers, but if you pay attention you'll see that your deal drifts down the best-buy tables and onto the dump, whilst new customers continue to get better deals.Keep an eye on your deal and the others on offer, and always compare insurance quotes at renewal.11. Set your expectationsYou have to be realistic about your abilities, and accept that multi-millionaire 25-year-olds have had some luck. Most people don't get stinking rich.If 100,000 people buy Paul McKenna's book 'I Can Make You Rich', how many of them do you think will be worth £10 million in the next 20 years? Not many.But we can all aim for a gradual growth in our money till we can afford everything we need or want, provided we don't keep dreaming about 15 bedroom mansions, yachts and a fleet of luxury cars. Let go of those thoughts and you'll be a lot happier!12. Understand compoundingCompounding isn't magic, it's a real and important part in becoming rich, my way.Here's an example. To keep it dead simple, let's say you just invest £1,000 and that it grows, on average, at 7% per year. 7% of £1,000 is £70, so after the first year you have £1,070. However, in the next year you get 7% of £1,070, which is £75.It doesn't sound like much, but over 30 years you'll have accrued £7,600. Without compounding, it'd be merely £3,100.Now, if you invested £1,000 every year (£30,000 in total), with the same average returns you'd end up with £100,000!What you must remember with compounding is that it builds up slowly at first and then in the later years it snowballs. To take advantage of compounding is simple: you must start investing early.13. Buy a propertyBuying your own home makes a lot of financial sense in the long term. I'm not talking about property investing, I'm talking about having a place to live where, in the end, you need pay no rent or mortgage payments.This comes with the usual caveats: buy only when you can afford it; make sure you could still afford repayments if interest rates rose a few points; and remember that property prices can go down in the short term, so don't think you can buy and then sell quickly if you've budgeted badly.If you're following my other rules, you should be able to buy one day. 14. Take the plungeYou can't just sit around if you want to get rich. You need to move with energy, and you need to get on with it. Once you've started doing all the above, it'll become habit. So go for it!