“Wall street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.” – Warren Buffett
Think about this. In your entire lifetime, how much money has gone through your hands? Let me explain to you what I mean by this. Maybe you made $73,000 last year as a 28-year-old. And you got your first check at the age of 14 for $100.00. Add everything up from that first check until today. You’ll come up with a number. It could be $493,000 or $10 million, depending on who is reading this.
The question is how much is left in your wallet? Truly. How much is in your wallet? Not your credit card limit, but how much savings do you have left? If you’re unhappy with the answer, the reason is very simple. It’s because you don’t know how to play the money game. It’s as simple as that.
So in this article, I get into the 10 rules of money.
These are the rules of money that I’ve followed. They’re based on a lot of mistakes I’ve made because there was a point in my life where I made money and there was nothing left in my pocket. So what I’m telling you is based on my experiences.
Here are the Rules of Money:
#1: It’s a Game
“If calculus or algebra were required to be a great investor, I’d have to go back to delivering newspaper.” – Warren Buffett
Rule #1 is the most important one, and it’s the one you have to buy into immediately. It’s very simple. The rule is that money is a game. The great thing about any game is that no matter what game you play, you eventually get good at it.
If I’ve never played chess, and you’ve played it 100 times, you’re probably going to beat me. If I’ve played Monopoly 1,000 times and you’ve played it three times, I’m probably going to beat you. So the great thing about the money game is that it can be learned.
#2: Don’t Be a Hater of Money
The Stock Market is designed to transfer money from the Active to the Patient. –Warren Buffett
Next, don’t be a hater of money. If you hate money, you’ll never get money. Why? Because money doesn’t like haters. If you constantly say things like, “Money doesn’t grow on trees” or “Rich people are this or that,” money responds by saying, “You’re right!”
It’s almost like if you go on a date with an attractive girl, and you tell her you don’t like attractive girls that don’t know a lot about philosophy.
So keep that part in mind, and don’t be a hater with money.
#3: It’s a Doubles Game
I’d like to live as a poor man with lots of money. –Pablo Picasso
Number three of the rules of money is that money is a doubles game. Listen, you could stop reading right now, as long as you understand this.
The entire game of money is about doubling your money. What do I mean by double your money? Let me explain it to you this way.
If you have $1,000 cash in your bank account, you are 10 doubles away from having a million dollars. You’re five doubles away from $32,000 and 14 doubles away from $16 million dollars. How soon can you double your money?
That’s it. It’s a doubles game. Can you take that $1,000 and double it to $2,000 in the next year? Now that it’s $2,000, you’re nine steps away from a million dollars.
Building wealth is a piece of cake when you understand the doubles game.
#4: Secret Account
“Someone is sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffett
The next of the rules of money is to have a secret account. You always have to have a secret account.
What’s a secret account? It’s an account no one else – including your spouse, parents, best friend, siblings – knows about.
A secret account is a crisis account and could be cash. It’s an account that’s sitting somewhere that no one else knows about. You have to have a crisis account that’s not your emergency fund.
#5: Don’t Fly First Class
“Accounting is the language of business” – Warren Buffett
Next, don’t pay to fly first class until you have $10 million in the bank. I see so many people spending $2,000 on a flight when they can spend $400. I don’t pay first class.
Why is that? It’s because I did the math. Obviously, I can afford to do it, no problem. But here’s how I did the math. If I pay $2,000 for a first class flight and I can get on the same flight for $500, that’s $1500 more I’m paying for the flight. If I fly nine times a month, that’s a $13,500 monthly difference. Do you know what I can do with $13,500? That’s four employees or marketing or expansion. Over a year, it’s $162,000. Why would I waste that money? That’s an executive I could bring in, or two incredible employees. So I don’t pay first class.
Once you have $10 million in the bank and you want to do it, great. At that point you may want to buy a private jet, but don’t pay for first class until you get to that point.
#6: Study Smart Investors
An investment in knowledge pays the best interest. –Benjamin Franklin
Next, study smart investors. For instance, you should read everything Warren Buffett puts out. Every single thing. Read all his books, because as you do, he’ll teach you his way of thinking, his mindset.
People ask, “Why did Warren Buffett spend $35 million to buy silver six years ago? And why does he stay away from technology?” The thing you have to respect about Warren Buffett is that he sticks to a philosophy long enough until it works. So study smart investors.
#7: Play Your Game
The only place where success comes before work is in the dictionary. –Vidal Sassoon
Number 7 of the 10 rules of money is to play your game. Don’t compare or play someone else’s game. Play your game.
Let me explain. Let’s say that when you play the doubles game, you’re at $8,000. And let’s say your friend is at $128,000. Why are you comparing yourself to them? You need to play YOUR doubles game. He is four doubles ahead of you, so it’s not the same game.
You can’t say, “I’m going to play my game at the level with the other guys” because when you do that, you make reckless decisions and you may lose a double. You don’t want to lose doubles.
#8: Befriend Money Makers
Rich people have small TVs and big libraries, and poor people have small libraries and big TVs. –Zig Ziglar
The next of the 10 rules of money is to befriend money makers that you trust. Here’s why. If you’re around other people that know how to make money, you’re going to make money.
If you’re around people that don’t make money and don’t know how to make money, you won’t make a lot of money. That’s just how things work.
It’s important for me to know who I’m going to do business with. I travel with the person so I get to know them. So whoever you’re going to do business with, befriend them. Travel with them.
If somebody’s extremely wealthy, go to dinner with them. Get to know their spouse, and how they are around their kids. See their standard of living, behavior, and discipline and if you like what you see, determine to do business with them.
#9: Diversification is for Sissies
“Wide diversification is only required when investors do not understand what they are doing” – Warren Buffett
The next money rule is that diversification is for sissies. So if you’re a sissy and your risk tolerance is very low, it’s okay. It’s okay to be a sissy. A lot of people are sissies. But if you truly want to create wealth, and you wonder why you don’t have a single penny after working for 17 years, you have a problem.
What’s the problem? Diversification is a great concept for financial advisers to sell to people that want to play things safe. If you’re watching this and you’re 73 years old, diversification may be good for you.
I’m talking to people that are trying to get their doubles to go faster. If you rely on diversification, it takes 20 to 40 years, and that’s if everything goes the way it’s supposed to. So don’t rely on diversification to take you where you want to go.
#10: Big Cheque Syndrome
The stock market is filled with individuals who know the price of everything, but the value of nothing. –Phillip Fisher
Last but not least of the rules of money is big cheque syndrome. Oh my gosh, I’ve seen so many people screw this whole thing up.
Let me tell you what I mean by big cheque syndrome. Let’s hypothetically say you sell real estate. And all of a sudden a client wants you to sell their $3 million home. You sell it and get a $100,000 commission cheque. You say to yourself, “Oh my gosh! I made $100,000!” And for two months you live as if you made $100,000 in a month.
What you don’t realize is that you need to look at that $100,000 as $8300 a month income for a year. Don’t look at it as $100,000. Look at it as $8300. I see so many people that see it as $100,000 and get arrogant and cocky. They don’t realize it’s just a big payday. And their double goes lower and lower and lower.
I want income coming in that feeds my game so I can increase my net worth. Income is a very, very important game, so don’t get too crazy about big cheque syndrome and all of a sudden fall for it and lose everything.
Your Turn to Play the Money Game
As I said in point three, one of the most important ways to win the money game is to play the doubles game.