The Most Important Rule in Investing
Applying the most important rule in investing that will be highlighted in this article is the essential ingredient not only to your investing success but also to everything you seek to accomplish.
What comes to your mind when someone mentions the word investing?
Does it mean, putting your money in insurance, mutual funds, the stock market, or even high-yield investments? Other people might only think about investing when they are about to die and they haven’t left anything for their offspring.
Some even shiver when they hear the word, often claiming that they have no money to invest or feel that is too complicated a subject to even discuss.
Many people even invest heavily in health supplements, personal trainers, and beauticians to make themselves live longer, healthier, or even look younger! Imagine the advertising budget for beauty companies nowadays.
All these are legitimate concerns but when it comes to investing I am talking about the most important investment a person can make in his lifetime.
Invest in Yourself
The most important and No.1 rule is “Invest in Yourself” – if you don’t, who else will?
Your parents will only invest in your education only until you leave college. That is the basic necessities provided and does not teach you important lessons about financial education.
Would you depend on colleges or universities to teach you how to make money? Most colleges only teach you skills so you can earn money working as an employee. How about business school? Honestly, if business lecturers are such experts at business, why are they still lecturing there instead of making a fortune in business ventures?
You and only you have to be proactive enough to take that responsibility
You see, when you invest in yourself, it means taking on the importance of educating yourself. Education in this case is not an academic or technical sense, though they are necessary skills to be developed in life. Our education doesn’t stop at college.
For most working adults, their education enters the retardation stage after they leave college. They stop learning and therefore they stop growing. They only grow sideways from eating too many pizzas or take-out during their busy lunch breaks.
We know that IQ is important right? But why aren’t the most intelligent people in the world the richest people in the world? There are many accountants and financial planners rushing to their cars every evening trying to beat the after-work traffic congestions! They are not rich!
How about EQ or Emotional quotient? Do working hard, having a great attitude and a positive mindset solve our financial situation? These are important when running a business, but let me illustrate:
If you are driving from point A to B using the wrong road map, you won’t get to our destination no matter how fast you drive your car (working hard)! You can work harder, but you would only get to the wrong destination faster! You may have the best attitude in the world or the most positive mindset, but you still won’t get to point B (although the journey wouldn’t bother you since you are feeling positive about it)
Importance of Financial Education
You must FIRST invest in your Financial Intelligence.
Having good financial intelligence is not about saving tons of money or dumping them into mutual funds. It is developing a healthy money relationship and building a wealth of assets that will generate you money.
What does it take to develop your financial Intelligence?
Delayed gratification is one of the most important aspects of developing your financial intelligence. Take this as a hypothetical example.
Would you pay for a pint of milk or a cow?
If you buy milk, it is consumed and it is over. You will have to buy milk over and over again when it is finished. Even if the milk costs less than a cow, in the long run, you will still be buying milk again and again.
Now, if a cow were to cost 50 times more than milk, you might pay through your nose when you purchase the cow, but after consuming 50 pints worth of milk from the cow, you would break even on your investment and save more money in the future. In fact, the cow might give birth to 2 or more calves and you could sell one of them for profit!
Get the idea?
EVERYONE is capable of creating wealth. When you take a beat-up old car and give it an overhaul, splatter it with a new coat of paint, and change a few more parts to make it start running again, you could sell that car for more money than if it was just a beat-up old car. You would have created wealth in the process!
How about a farm? If you turn a farm into a country home getaway resort, wouldn’t the value of the farmland increase in manifold?
It is the same principle for chefs, computer programmers, and craftsmen. The sum of the whole is greater than the parts. We are all capable of creating wealth even out of thin air and that is the first step to getting our creative juices flowing.
The value of anything is defined by supply and demand.
You don’t need to be a Major in economics to understand this. Money is just an idea. Remember the desert island example? The true measurement of money is not the cents or dollars it represents.
If you have developed a product that people want, would they pay more to you than usual? Would you apply your skills in creating good assets?
Invest in assets that bring long term value. Anything that brings you more income is an asset. Don’t invest too much in liabilities like cars or boats. Even houses are not considered assets until they are fully paid off (If you lost your job tomorrow and you can’t pay for your house, is your house an asset or liability?)
Are you willing to step out of your comfort zone and pay the price for financial intelligence or ignore the signs of the times and expect your boss, the government, and the bank to take care of you financially for the rest of your life, living below your means and never taking risks to better your family’s future?