Managing your personal finances is of utmost importance if you don’t want to go broke in your life. However, as nature would want, many people struggle to manage their finances.
The prime reasons for inefficient personal finance management is the lack of expertise that people posses in the domain of finance. In such a situation, having advise from some expert is a bliss to have.
And who would be better and more capable than the top self-made billionaires of the world, afterall they have risen from some of the most humble backgrounds to some of the most influential people ever. So, in this post, I would be talking about 6 Personal Finance Tips given by the Top Billionaires.
Tip #1: Think Big
“If people are not laughing at your goals, your goals are too small.”— Azim Premji
Azim Premji, the President of Wipro ltd., one of India’s biggest corporate house is a man known for his contribution in the diversification and growth of the Indian computer industry. He is unofficially known as the czar of the Indian computer industry.
According to him, the biggest mistake anyone can do is to not think big. Dreaming big and aiming for higher goals is your sure shot way of achieving the financial goal.
However, when he says about dreaming big and high, he does not mean mere imagination and dreams, he stresses on execution as well. One must dream big and work hard to achieve it. This stands true in case of managing personal finances as well.
If you want to earn 1 million as your financial goal then aim for 10 million and work to achieve that goal.
Tip #2: Start Early
“Start now. The sooner you start managing, saving, and investing, however limited, the better off you’ll be.”— Carlos Slim
Carlos Slim is a Mexican businessman who was ranked as the richest person in the world for a few years. He advises people to start practicing financial discipline as early as possible.
The sooner you start the greater hard start you get. When you start early, you have the luxury of time which is perhaps the most expensive thing. You could try things, make investing plans and take greater risks in your 20s because even if you loose all the money, you still have time to build your fortune.
Even Robert Kiyosaki has said that it’s better to be broke in your 20s than at the time of your retirement. So start as soon as possible, no matter how small you start, but taking that first step is what actually counts because it instills a sense of financial discipline in you which most people lack.
Tip #3: Pay Yourself First
“A Part of all you earn is yours to keep.”— GEORGE S. CLASON
George Clason, in his best seller book, The Richest Man in Babylon has emphasized enough on the need to pay yourself first. He reiterates this thing time and again in the book.
Geroge, from his personal experience and from all others he had met, came to the conclusion that rewarding yourself by keeping atleast one-tenth of your earnings is the best possible finance tip anyone could give anyone.
However, paying yourself does not mean, spending money on luxuries or wasteful expenditure. Instead it means saving money and then investing it in different income generating sources. So, say this thing every time you wake in the morning, “a part of what I earn is mine to keep”, and make this saving and investing thing a habit.
Tip #4: Expenditure on Luxuries is Nonsense
“Most toys are just a pain in the neck”— Warren Buffet
Warren Buffet, the biggest and the most successful investor in the world, has many times talked about how expenditure on buying luxuries is the most nonsensical expenditure anyone could do.
It may surprise you, but the world’s wealthiest person, Carlos Slim (the same guy who could spend more than a thousand dollars a minute and not run out of money for one hundred years) does not own a yacht or a plane. Many other billionaires have chosen to skip these luxury items.
The reason is simple, luxuries are heavy liabilities and they are going to incur to regular maintenance expenditure which far exceeds the joy the give. So don’t take them as assets but as heavy liabilities. However, this does not mean that you should not spend your hard earned money on enjoying yourself with a good car, a great vacation, your favorite villa or any other similar thing.
What it essentially means is that, your expenditure on luxuries should be backed by strong assets in your balance sheet. Only when your assets outweigh your liabilities by a good extent, you should think of doing such things.
Tip #5: Don’t loose Money
“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”— Warren Buffett
Buffett personally lost about $23 billion in the financial crisis of 2008, and his company, Berkshire Hathaway, lost its revered AAA rating. So how can he tell us to never lose money?
He’s referring to the mindset of a sensible investor. Don’t be frivolous. Don’t gamble. Don’t go into an investment with a cavalier attitude that it’s okay to lose. Be informed. Do your homework. Buffett invests only in companies he thoroughly researches and understands. He doesn’t go into an investment prepared to lose, and neither should you.
Buffett believes the most important quality for an investor is temperament, not intellect. A successful investor doesn’t focus on being with or against the crowd.
The stock market will experience swings. But in good times and bad, Buffett stays focused on his goals, and so should all investors.
Tip #6: Make Your Money Work For You
“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”— Robert Kiyosaki
Robert Kiyosaki, known for his famous book, Rich Dad Poor Dad, has spoken about the need to put your money to work instead of you working hard all the time.
Investing your money in avenues which help money fetch more money is the best way to make wealth. Some of the investment alternatives are as follows:
- Direct Stocks
They represent ownership in a company to the extent of the number of shares held by the investor. By owning such shares you can have consequent income as the shares gains dividend.
- Mutual Funds
It is a pool of savings from a number of investors, who share a common financial objective.
These are just some examples of where you can invest your money to make it work for you. However, the key take away here is that, making your money work for you means taking control of your finances, then using that control to continuously improve your financial stability and security. You may eventually be able to gain financial independence or build wealth through investing.
You Too Can Do It!!
These tips from some of the most successful people can help you not only in building your fortunes but in life in general. These are tried and tested and have proved to be of immense use for many people.
In order to grow your wealth, it becomes essential to keep investing money. Keep a check on your expenses and align them with your financial goals. This will help you in achieving your goal sooner.