10 Money Rules That Never Go Out of Style

While some fads come and go, there are some timeless things that always ring true. Money has been around in one form or another for ages; it only makes sense that certain truths have been discovered in wise ways to make the best use of this asset.

Here are 10 rules that will never steer you wrong:

 

1. Practice intelligent risk management. Unless you have a large income and very frugal ways, you’re never going to amass a fortune by putting all your money in a savings account.

• That 0.31% interest might be about as safe you can get; however, higher risk investments are preferable over the long term to low interest income-producing investments. In today’s terms, think stocks for long-term investments, rather than low risk bonds or savings accounts.

2. Have an emergency fund. Without some savings to handle the inevitable hiccups that happen to everyone, your long-term plans can be in jeopardy. With an emergency fund, when a big financial challenge comes into your life, you can avoid having to dip into your retirement to pay your bills.
3. Putting all your eggs in one basket can be catastrophic if something happens to that basket. A significant financial loss to your portfolio can take 10 years or more to recover from. Diversifying your investments limits the amount of your losses.
4. Be patient. Many of the most successful investors spend the majority of their time sitting, not buying and selling stocks. When you find a great stock to purchase, it can be several years before the price matches the value. Many investors have sold way too soon, only to discover they should have waited.

• Amassing a fortune takes time, but that $300 a month you keep socking away will add up to something significant if you’ll give it time.

5. Avoid trying to time the market. Timing the market is an exercise in futility. Smarter people have used super computers and failed miserably. The best time to invest is now. Good investments may be harder to find than at other times, but now is always the best time.
6. Be cheap. When you’re buying managed investments like mutual funds, take a look at the management fee. Are you really getting your money’s worth? Be sure the management team is worth the extra money.
7. Buy low. While it can be lucrative to pay what something is worth and have the value grow in time, it’s even more lucrative to pay much less than something is worth. Search for investments that you can get at a bargain price. This assumes that everything else is in order as well. A bad company is a bad investment at any price.
8. Do something. Wishing and thinking require as much energy as making and executing a plan. Instead of daydreaming all the time, just do something. Even a little financial planning and some minimal, but consistent, action make a big difference over time.
9. Debt is usually a bad thing. No one wishes they had more debt. While the debt required to buy a house is acceptable within reason, any other debt should be examined closely.
10. Do everything (legal) you can to avoid taxes. Minimizing your taxes is work that’s well worth the effort. Everyone should pay as little in taxes as possible. Don’t just give away your money unless it’s charitable, and the IRS doesn’t count as a charity.

Every game has rules; money is no different. Which rules have you been following? Which have you been violating? Follow these 10 rules and you’ll be well on your way to mastering money.