When it comes to growing capital, many believe that buying stocks is one of the biggest secrets to success.
While it’s true that stocks have their place on a lot of peoples’ road to riches, most successful people do not just own stock – they also own other assets. This could include real estate, natural resources such as gold, silver and diamonds, companies or even business ideas.
Those who have ‘made it big’ control their futures, because they are able to control their assets. They understand how to make money, but they also realize that passive investments are never enough to truly thrive.
If you talk to any very wealthy person, you will most likely hear that their assets are spread over different areas. They may also say that their risk is controlled by their choice of investments, through the implementation of rules that are designed to help them protect their assets.
These rules sometimes mean that opportunities are passed up, but at the end of the day, most rich people understand that risk management is always the most important thing.
The 4 Major Money Rules that Could Help You Succeed
If you truly want to succeed at the money game, you will need to know these rules. These will help you learn how to start growing your funds, to understand which investments to choose and which to pass, how to make investments, what you need to get started and who to involve in your deals.
These rules are the cornerstone of the principles that can help to build and retain wealth, and include the following:
Rule 1 – Assess Current Financial Situation and Future Goals
The first money rule is that you cannot invest money that you do not have. You cannot even invest every cent of money you do have. You need to figure out how much money you can risk as assets, and from there you may find that your rules push you outside your comfort zone, making your sharper and more alert. This is often the best state for making good decisions, and for finding opportunities.
Before you can determine your money rules, you first need to know where you are right now, and where you want to be in the future. Much like planning a travel adventure on a map, you need a starting point, as well as a finishing point. This will allow you to trace the route to get from A to B. From that point, your rules will allow you to begin your very own path to success, in order to reach your ultimate goals.
Rule 2 – Develop Goals for Return on Investment
Another rule is to develop goals for return on your investment. These will be applied for cash-flow investments as well as appreciation. Once you know how much money will be required each month for investments, you can determine your ideal net worth over the next few years. Remember – investments grow wealth, while money in the bank prevents risks.
Rule 3 – Grow Your Investments with Cash Flow and/or Appreciation
The third money rule is to decide whether you want your investment to bring growth or income. You will need to evaluate your finances to determine exactly how much money you need, as well as the growth that you are able to afford. This will allow you to see how your investments fit in with your need for cash, growth or both.
You may choose to invest in rental property, or maybe natural resources like gold or silver. You may not want more money upfront, but would rather want to aim for the growth potential. In this case, you could seek out land that will be developed somewhere in the future, which will tie up your current cash levels.
Rule 4 – Choosing Passive or Active Income
The final money rule on growing your finances through investment is deciding whether your income will be active or passive. Active income requires your involvement to deliver return on investment. Passive income requires you to provide the funds, and then to let the financial managers of your investments do the work.
Whichever option you choose, both of these income types have the ability to help you grow your wealth and work towards the kind of financial life you have always wanted.