Browsing through some archived documents this morning, I came upon a list of my financial tenets from Get Rich Slowly.
When I started that site in April 2006, I didn’t know much about money. In fact, my financial life sucked. I went into the project with a proper beginner’s mind, though, trying to set aside everything I thought I knew about money. The only thing I thought knew for sure? “There’s no reliable way to get rich quickly; there is, however, a proven path to get rich slowly.”
Over time, however, I developed a financial philosophy. As I read and wrote, as I talked with readers and colleagues, and as I made changes to my own life, I developed a series of simple rules and guidelines.
These tenets evolved with time. I think there were eight at first, but by the time I created the Get Rich Slowly course, the list had expanded to fifteen. And each of those fifteen tenets had been refined and polished through ongoing exploration.
Reading through the list this morning, I realized it needed an update. Since I left Get Rich Slowly in 2012, my philosophy has continued to evolve. I now know there is a reliable way to build quick wealth, for instance. If you maximize your profit — the amount you save each month — it’s possible to become financially independent in a matter of years instead of decades. It’s great to get rich slowly, but you can do better — if you’re willing to make some changes to your lifestyle.
So, I took a couple of hours today to re-write my core tenets. Some have changed significantly. Others are much the same as they’ve always been. Plus, I added a couple of new ones to the list. In the end, I came up with the following eighteen financial tenets that make up the Money Boss philosophy.
Here’s financial success in a nutshell:
- You are the boss of you. Your circumstances might not be your fault, but they’re your responsibility. Sure, you’re a part of the overall economy, subject to both lucky and unlucky breaks, but ultimately you are in charge. Your motto must be, “The buck stops here!” Don’t blame anyone or anything else for your financial situation, and don’t expect somebody else to rescue you. Your financial fate rests in your hands.
- Nobody cares more about your money than you do. The advice that others give you is almost always in their best interest, which may or may not be the same as your best interest. Don’t do what others tell you just because they hold a position of authority or seem to have a persuasive argument. Do your own research, get advice from a variety of sources, and in the end, make your own decisions based on your own goals and values. And don’t accept defaults.
- It’s always best to be proactive. In life, there are often default options. If you don’t consciously and deliberately choose something different, you get the default. When this happens, your life shapes you instead of you shaping your life. Most people go through their entire lives in default mode. They accept what life hands them without question. They’re reactive. A money boss questions the default choices. Sometimes she accepts them; other times, she proactively seeks better alternatives. (As a bonus, being proactive helps you prepare better for both emergencies and opportunities.)
- The road to wealth is paved with goals. Without financial goals, you have no direction. If you have no direction, it’s easy to spend money on things you’ll regret later. But if you’re saving for a house, your daughter’s college education, or a trip to Europe, your goal will keep you focused, making it easier to spend on what’s important and ignore the things that aren’t. This is why I constantly preach the power of purpose.
- Profit is power. To build wealth, you must spend less than you earn. This is the basic law of money. Basic but important. Successful personal finance is all about building positive cash flow. By decreasing your spending while increasing your income, you can get out of debt and build wealth.
- Saving must be a priority. Most financial gurus recommend saving 10% or 20% of your income. That’s great, but if you really want to make an impact, aim to save 50% or 70% of your income. If you have to start small, start small. Even $25 a month is good. As you earn more and develop better habits, save as much as possible. The more you set aside, the quicker your wealth snowball will grow.
- Small amounts matter. Frugality is an important part of personal finance. Your everyday habits have a huge impact on your financial success. Thrift helps you build good habits, and makes a real difference over time. Plus, there are tons of opportunities to flex your frugal muscles. And, more and more, I’m learning that there’s virtue in efficiency. It really is better to enjoy financial independence on $24,000 per year than to do so at $48,000 per year. (More on this in the future.) The bottom line? Frugality buys freedom.
- Large amounts matter more. It’s good to clip coupons and to save money on groceries, but it’s even better to save on the big stuff like buying a car or a house. By making smart choices on big-ticket items, you can save thousands of dollars at once. Practice thrift, but always be looking for Big Wins. Big Wins are the quickest way to wealth.
- You are 100% responsible for your income. How much you earn directly reflects what the market believes you’re worth. Your income is based on the demand for your knowledge and skills, the quality and quantity of your work, and how well you market yourself to potential employers or customers. To earn more, you must be worth more. That might mean learning more, working more, working better — or all three.
- Slow and steady wins the race. The most successful folks are those who work longest and hardest at things they love to do. So try to find ways to make frugality fun, and recognize that you’re in this for the long haul. You’re making a lifestyle change, not looking for a quick fix. Remember: Even the quickest path to financial independence and early retirement takes years to achieve. Be patient and gritty, and you will persevere.
- The perfect is the enemy of the good. Too many people never get started putting their finances in order because they don’t know that the “best” first step is. Don’t worry about getting things exactly right — just choose a good option and do something to get started.
- Action is the cornerstone of success. It’s easy to put things off, but the sooner you start moving toward your goals, the easier they’ll be to reach. It’s better to start with small steps today than to wait for that someday when you’ll be able to make great strides. Get moving. Trust that you’ll pick up momentum in the future.
- Failure is okay. Everyone makes mistakes — even billionaires like Warren Buffett. Don’t let one slip-up drag you down. One key difference between those who succeed and those who don’t is the ability to recover from a setback and keep marching toward a goal. Use failures to learn what not to do next time.
- There’s no single “right” way to achieve financial success. Each of us is different. We have different goals, personalities, and experiences. We each need to find the tools and techniques that are effective for our own situations. There’s no one right way to save, invest, pay off debt, or buy a house — and don’t believe anyone who tells you there is. Experiment until you find methods that are effective for you. (Note, however, that there are wrong ways to do these things — steer clear of obvious bad choices.)
- Smart money management is more about mindset than it is about math. Financial success comes when you master the mental game of money. It’s not about understanding the numbers. The math of personal finance is simple: Spend less than you earn and invest the difference. We all get it. Instead, it’s controlling your habits and emotions that’s difficult. Use barriers and pre-commitment to automatically do the right thing.
- You can have anything you want — but you can’t have everything you want. Being smart with money isn’t about giving up your plasma TV or your daily latte. It’s about setting priorities and managing expectations, about choosing to spend only on the things that matter to you while cutting costs on the things that don’t. Everything’s a trade-off. Decide the level of comfort that’s right for you. There’s no right or wrong. You just have to be willing to pay the price for the lifestyle you choose.
- Financial balance lets you enjoy tomorrow and today. You don’t have to choose between spending today and saving for tomorrow. You can do both. Strive for moderation in all things: Pursue your goals, but don’t forget frugality; be frugal, but don’t forget your goals. From my experience, both spendthrifts and misers tend to be unhappy.
- It’s more important to be happy than it is to be rich. Don’t be obsessed with money — it won’t buy you happiness. Financial success should be a side effect of a happy, productive life — not a primary aim. Sure, money will give you more options in life, but true wealth is about something more. True wealth is about relationships, good health, and ongoing self-improvement. Everything else is a lower priority.
These are my rules and guidelines for building wealth. As you begin to manage your money more mindfully, you’ll create your own financial tenets. Your experience may or may not match mine. Your tenets might be similar — but there might be some differences too.
When you learn something new, write it down. Explain why you believe what you believe. And as you gain more experience, don’t be afraid to alter your list of rules. In time, you’ll have developed your own personal financial philosophy. When you feel like you’ve lost your way, return to your list to remind yourself of all the things you’ve learned. Use your list as a roadmap to a better financial future.