How to become rich and what you need to know about money?

If you are interested in becoming rich, you have come to the right place. Today we will tell you about 10 useful money lessons that will teach you financial management. From the accumulation process to a reasonable investment in the stock market, a wide range of “right” habits and skills is considered here..

Of course, all this will not make you a millionaire overnight. But, having spent several minutes studying a couple of financial lessons, you will make the foundation for your future condition stronger and higher. So, in order to become financially independent you need:

1. Calculate personal capital

Your net worth is to show your financial health. This is the sum of your total assets less liabilities and debts. It is recommended to recalculate net worth at least twice a year. Net worth can also be used to measure how far you go over time..

Here is the exact method that the financial planner Sofia Bera uses, described in her book “What You Should Have Learned About Money, But You Didn’t Know”:

“I have a table that I start filling out from my online accounts, pension and savings accounts, investment assets, etc. Then I enter into the same table any debt obligations and subtract them from the amount of assets. It turns out approximate net capital. ”

2. Change money thinking

Contrary to popular belief, the apartments of most wealthy people do not differ much in appearance from ordinary ones. And this is more related to the way of thinking and psychology than to anything else. You may be surprised at this as good news, but everyone can change their beliefs, thoughts and habits, making their mentality more conducive to enrichment.

You should start thinking of money as an investment opportunity, rather than saving or spending. Here is what the millionaire Grant Cardone writes in Entrepreneur:

“The only reasonable reason to save money is investing. Put accumulated in secured, “sacred” (inviolable) and investment accounts. Never take money out of there for anything, even for emergencies. Regardless of your desire, this will make you gradually increase profits..“

3. Determine where all your money goes

Keep records of where the money is spent, be it fixed expenses (transportation, rental) and discretionary, such as food, travel on vacation, etc. A clear knowledge of your spending is an important step towards financial independence.

To facilitate prioritization and reporting, you can create your own spreadsheet or use one of the special financial mobile applications. Thanks to this, you will quickly figure out where there are financial gaps, and where you can get additional savings for, for example, early retirement. The table can be extremely simple and minimal, and can include many points and formulas – make it so that it is most convenient and understandable.

4. Prioritize debt

Former Wall Street CEO, Ellevest founder and CEO Sally Kravek says:

“Debt repayments with high interest should always be a priority. Its priority exceeds even the formation of a reserve fund. ”.

Let’s say you have a credit card debt of 300,000 rubles with an interest rate of 18%. Imagine that you have earned 300,000 rubles. If you split this money for different purposes -? part for repayment of loans and? to create a cash reserve – you still have 150,000 rubles of debt left, and in cash there will be 150,000 rubles.

An interest rate of 18% in one year will turn 150,000 into 177,000. And the reserve fund will not produce anything and will not grow, so in fact, you will lose 27,000 rubles (those same 18%).

Conclusion: you will save more if you first pay off debt with a high rate than you earn on the stock market or savings account.

5. Start “paying” yourself first

“People still don’t understand that they need to save 10 cents for every dollar.” – Self-made millionaire and writer David Bach (from a Business Insider interview on Facebook Live.)

David says that the average person who saves money only saves 15 minutes of his daily income, and should – an entire hour. Bach calls this approach “pay-yourself-first plan” (pay yourself first). This means that you personally accumulate money for the future, which guarantees an exponential increase in savings over time..

If you are an employee or work on piecework, all that is required is to make a simple calculation of your hourly income.

Suppose you earn 500,000 rubles annually and spend 40 hours a week at the workplace. About 1920 hours of work will be typed per year, that is, the actual payment per hour of work is approximately 250 rubles. Set aside this amount daily and you never have to worry about money..

6. Find out what you need to accumulate

The money that you “pay yourself” should go in the two most important areas of expenditure: the pension fund that ensures your life after work, and a personal reserve fund that covers any unforeseen expenses that arise in life.

As a rule, the older you get, the more you earn and spend. And if you lose your job, it may take longer to find an offer that matches earnings from your last job..

In addition, you should know what your monetary goal is. This is probably buying a property, educating children or buying a car. Define it and then you can calculate how much money you need and what financial strategies are best for accumulating this amount.

7. Invest in the stock market

How to become rich? – Of course, start investing. It may seem daunting that investing is someone else’s gamble. But this is an erroneous opinion. You do not need to be a brilliant master or have a huge salary to get a good return on investment in the long run.

One of the best and most convenient ways to make money in the stock market is to invest in ETF funds. ETF – having many shares and working with minimal costs and high tax efficiency, is good for two reasons: it eliminates the individual risk of investing in individual shares and is inexpensive.

In order to start, you must open a brokerage account. This can be done online at one of the brokerage companies. And remember, it’s always better to be in the market, even if it’s volatile, than to be outside.

8. Find out how your partner looks at money

Despite all the discomfort of talking about money, this is an important aspect of a healthy relationship. In the end, money is one of the most common causes of divorce..

“Smart couples talk about money all the time,” Bach writes in his book Smart Couples Get Rich. When you work together on finances, results and efforts are combined, reducing the risk of errors.“

Where to begin?

• First of all, understand the financial background of your partner. Understand how he feels the money, which he considers the purpose of his life. This will allow you to understand how a loved one makes financial decisions..

• You can then discuss more specific details. For example, who is responsible for paying bills (regardless of whether you want to have joint accounts) and what are your specific monetary goals as pairs.

9. How much money you need to keep in your current account

The amount of savings in the account should be at least one monthly income. To do this, it is recommended to look for offers without a minimum balance and a monthly fee. Even better – the account should be with a refund of the commission at ATMs of other banks and interest on the balance.

10. Decide on the necessary types of insurance.

Each person must have health insurance and ensure its validity, the car owner – car insurance, and the owner of the house – real estate insurance.

Maybe you need some additional protection? Pay attention to these rules developed empirically:

• Providing yourself, a good solution would be to obtain disability insurance.

• If you have children or other dependents, large commitments such as mortgages or substantial student loans, apply for investment life insurance.

• If you rent something, take out tenant insurance. In addition to covering hacking or fire damage or weather disasters, tenant insurance also covers incidents such as car breakdowns. The fact is that car insurance covers only those losses that relate directly to the car. If a valuable item is stolen from your trunk, it will not be protected by the contract.

When everything goes smoothly and calmly, insurance seems like something unnecessary and unprofitable precaution. However, it fully pays for itself when the situation seriously deteriorates, and losses and unforeseen expenses occur again and again..