Wealth Principles
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Wealth Principles Summary
In order to gain wealth, you must understand the wealth principles behind wealth building. Engaging in wealth building without realizing these essential core principles equates to you setting yourself up for frustration. Many who attempt to build wealth are blindsided repeatedly by the world’s temptations, erasing their progress or wasting their time. Study and absorb these principles, and use them as your firm footing to resist having your wealth eroded from underneath you.
Live Inside your Budget
Live Inside your Budget
Those who spend more than they earn will always owe someone, or barely break even, which is an intolerable and unsustainable way to exist. This eliminates their short term enjoyment of life, as they are surrounded by constant financial stress. The debt they leverage to survive accrues interest, which kills their ability to gain wealth in the long term. That limit’s their long term ability to live.
Deliver Value
Deliver Value
The easiest way to gain wealth is to deliver value to others. Providing value to others in a repeatable and easily scaled fashion is a surefire way to gain wealth. You learn a skillset that is used to deliver value, master that skillset, and provide value in excess of price while earning a profit with that skillset.
Create Passive Income
Create Passive Income
All paths to success are not equal. There are many ways to leverage passive income to acquire success, and they vary in amount of effort for return. By grouping work types into categories based on whether they deliver active or passive income, and regarding passive income categories as higher than active, you can focus on efficient ways to acquire wealth.
Create Multiple Types of Income Streams
Create Multiple Types of Income Streams
There are so many ways to make money other than working 8 hours a day for next week Friday’s paycheck. Relying only on a single income stream is highly limiting and restrictive to wealth gain over the long term. Mastering and implementing multiple types of income, or diversifying your income, will greatly accelerate wealth gain. There are multiple types of income, both active and passive, and we will cover them all here.
Value Financial Security over Materialism
Value Financial Security over Materialism
Our society often regards money as something that can or should be used mostly to increase material standing. Let’s redefine material standing, the purchase of luxury goods or services, as visual standing. We use our money to look good, and only seek financial security second. You should value financial security over society’s materialistic tendencies.
Avoid Flaunting Your Wealth
Avoid Flaunting Your Wealth
A problem created by continuously using wealth to purchase visual items and appearances is that it attracts those that gather solely because of your appearance. This includes scammers, gold diggers, fakes, and leeches. You may have to spend large sums of money to be considered popular with these people, then further sums of money to maintain appearances. You may feel the need to compete with these friends over appearance when it comes to money, inducing financial mistakes. This is a negative use of cash that could garner wealth over long terms.
Simple Strategies are Better
Simple Strategies are Better
Your most important responsibility is comprehension. As an investor, you should always understand your public or private investments. If you don’t comprehend, or cannot comprehend, your investment you should not opt in until you learn all negative risks and how the investment generates profit. Even if an investment you do not comprehend is working now, you will not know what went wrong if it results in losses.
Value over Opinion
Value over Opinion
The key to wealth is recognizing value. This applies to both purchases for self-enjoyment and to gaining wealth through investment. Your approach to investment should be thoroughly value based: acquiring items and investments below their actual worth, holding them while they increase in price, and selling them above their value. Successfully increasing worth repeatedly builds wealth.
Investment Beats Speculation
Investment Beats Speculation
Individual investors confuse investment and speculation very often. When actively attempting to gain wealth, speculation has very little place in a long term, sustainable, wealth gaining strategy. Often both are used, but investment has a much stronger track record in the long term over speculation. The difference between investment and speculation can be found in their definitions.
Reinvest Earnings
Reinvest Earnings
Your wealth must be allowed to grow over the long term. This has a single serious implication: you must not spend your wealth or the earnings it provides you, but must allow it to grow over the long term. Gaining wealth requires the retention of both principal and interest earned/capital gains.
Reduce Investment Fees
Reduce Investment Fees
Fees and costs erode wealth that has plateaued, slow wealth that is growing, and accelerate the decline of wealth that is decreasing. This works for any and all types of costs, including basic expenses and luxury expenditures, but most importantly pertains to fees and commissions, and interest paid out.
Regard Opportunity Cost as Real
Regard Opportunity Cost as Real
Many investors do not include or consider opportunity costs in their calculation of loss. They simply allow multiple opportunities to come and go by, failing to factor in the price of taking no action on their investments. They also continue within the same investment trajectory while equal or lower risk financial paths that deliver higher returns exist. Many would be investors do absolutely nothing with the vast majority of their income, letting it sit in a savings account after an emergency fund is built. These investors are often scared or ignorant of investing, and would rather leave their money in savings than risk loss in the market.
Prioritize Familial Wealth
Prioritize Familial Wealth
Personal investors need to think long term. By long term, we mean as far down the line as possible. Many investors think they only need to concern themselves with their own personal retirement. This is wrong. In all cases, it’s substantially wiser to think about your family’s wealth beyond natural death or life expectancy. You should think beyond your own timeline in consideration of your finances, especially if you have children.
International Economic Analysis:
- Major Currency Economic Summaries
- Performance of Major Imports and Exports
- Mandates of Central Banks versus Expectations
- Performance Indexes of Major Economies
- Economically Correlated Currency Projections
- Large Funds Currency Sentiment Readings
- List of Technical Indicators to Look For
- Occasional: Foregin Exchange Technicals Markups
American Markets Analysis:
- Summaries of American Economic Structure
- Performance of Major
- Imports/Exports
- Federal Reserve Mandate versus Expectations
- Performance Indexes of U.S Economy
- Economically Correlated U.S Dollar Projections
- Large Trading Fund Index Sentiment Readings
- Market Wide Earnings Versus Valuations
- Fundamental Ranking of U.S Business Sectors
- Best and Worst Future Consensus Estimates
- Occasional: Firm Fundamental Strength Report
- List of Technicals to Look for While Trading
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