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5 rule that you should follow from today for the successful financial life

#1: Do not spend money. Invest money.
Most people, when making a purchase, ask all the wrong questions.
For instance, when buying a new pair of shoes, do not ask how good they look or what brand they are.
Ask how long they’ll last, and in what kind of weather, and what the warranty is. If you get a good pair of warm waterproof boots with a lifetime warranty, they could literally be the last pair of boots you’ll ever need to buy.
It is much better to buy a $400 winter jacket which will last you 20 years than a $200 one which will last you six. And both of those are better than the $1000 one which will be out of fashion in three.
In other words, there are financial ramifications to every spending decision you make. If you buy an iPhone, will you also need a case for it? How expensive is the data plan?
If you buy a house, how will that impact your taxes? What is the resale value looking like?

#2: A dollar saved is $20 earned
This one is pretty simple. If you put $1 in an investment account and wait 40 years, it will become $20.
This is the magic of compound interest.
In practical terms, it means that your go-to option should always be to tighten your belt. Put away some money every week, and it will pay itself back 20x over.

#3: Never lose money for free.
Again, a simple rule to understand.
Maximize your tax exemptions. Paying extra tax is losing money for free.
Never ever EVER pay your credit card late. Late fees are losing money for free.
Don’t borrow money*. Paying interest is losing money for free.
Always comparison shop. Why pay more for the same product? That’s losing money for free.
Turn off your heat when you leave the house. Leaving the heat running is losing money for free.**
*Note: There are some occasions when borrowing money is not losing it “for free.” For instance, mortgage payments can be tax-deductible. In these cases, sit down with a calculator. Doing the math wrong (or worse, not doing it at all) is losing money for free.

#4: There IS such a thing as free lunch.
Actually, the original rule is “free lunches are everywhere,” but that isn’t quite so catchy.
For instance, credit cards often offer rebates on purchases. I have one that offers 5% back on select categories each quarter. Actually, I have 4 of them from different companies.
Every few months, I write on them in sharpie what categories they’re giving me discounts on. Every time I make a purchase, I use the one which gives me the biggest rebate.
Congrats, I just got 5% back on life.
And it’s not just credit cards. Just this morning, I just got sent a promotion where I get $300 back for opening a new bank account. Of course, the devil’s all in the small print. Yearly fees, etc etc. Which would be really bad (see rule #3), except I’m going to cancel the account the second they deposit the money. Thanks for the free $300.
** Dad used to tell us how he would turn the heat off in his apartment entirely and simply leave his door open to steal heat from the hallway.

#5: Minimize Risk
There is a law called the “law of diminishing returns.”
The more of something you have, the less it matters.
The same is true of money and happiness.
If you have $0 and I gave you $100,000, it will change your life. You will be overjoyed. If you have a million dollars and I give you $100,000, you’ll barely notice.
This is why taking risks is rarely worth it.
When you win big, you are rarely much happier. But if you lose big, it’s a disaster. There’s a reason the trope about stock brokers jumping from windows exists.
One of the big problems with how people think about money is that they only tend to hear about the big successes, never the big failures. We think of rich people as musical artists, entrepreneurs, pro athletes, and stock traders, because most of the richest people belong to those groups.
But you never hear about all the ones who tried and failed.
Meanwhile, you can be almost exactly as happy with “only” a few million, which is something very achievable by skilled laborers. Tell a doctor or a lawyer that they ought to be miserable because they’re “only” making six figures, and I guarantee they’ll laugh at you.

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