Continued from last post
11. The Law of Conservation: It’s not how much you make, but how much you keep, that determines your financial future.
The true measure of how well you are really doing is how much you keep out of the amount that you earn.
12. Parkinson’s Law: Expenses rise to meet income.
Developed by an English writer C. Northcote Parkinson many years ago, the law says that no matter how much money people earn, they tend to spend the entire amount and a little bit more besides.
- The first corollary of Parkinson’s Law says: Financial independence comes from violating Parkinson’s Law. Resist the powerful urge to spend everything you make, and you’ll move ahead of the crowd.
- The second corollary of Parkinson’s Law is: If you allow your expenses to increase at a slower rate than your income, and you save or invest the difference, you will become financially independent in your working lifetime.
13. The Law of Three: There are three legs to the stool of financial freedom: savings, insurance and investment.
- The first corollary of the Law of Three says: To be fully protected against the unexpected, you require liquid savings equal to two to six months of normal expenses. This simply means your first financial goal is to save enough money so that if you lost your source of income for up to six months, you would have enough put aside to carry you over.
- The second corollary of the Law of Three says: You must insure adequately to provide against any emergency that you cannot pay for out of your bank account. Perhaps the deepest need or craving of human nature is the desire for security, and without adequate insurance, you are taking risks that you simply cannot afford.
- The third corollary of this law says: Your ultimate financial goal should be to accumulate capital until your investments are paying you more than you can earn on your job.
14. The Law of Investing: Investigate before you invest.
- The first corollary of the Law of Investing is: The only thing easy about money is losing it.
- The second corollary of this law comes from the self-made billionaire, Marvin Davis, who was asked about his rules for making money in an interview in Forbes Magazine. He said that he has one simple rule and it is: “Don’t lose money.”
- The third corollary of the Law of Investing says: If you think you can afford to lose a little, you’re going to end up losing a lot. Always ask yourself what would happen if you lost one hundred percent of a prospective investment. Could you handle that? If you could not, don’t make the investment in the first place.
- The fourth corollary of the Law of Investing says: Only invest with experts who have a proven track record of success with their own money.
15. The Law of Compound Interest: Investing your money carefully and allowing it to grow at compound interest will eventually make you rich.
Compound interest is considered one of the great miracles of all of human history and economics. Albert Einstein described it as the most powerful force in our society. The key to compound interest is to put the money away (say, in a fixed deposit account) and never touch it.
16. The Law of Accumulation: Every great financial achievement is an accumulation of hundreds of small efforts and sacrifices that no one ever sees or appreciates.
- The first corollary of the Law of Accumulation says: As your savings accumulate, you develop a momentum that moves you more rapidly toward your financial goals.
This principle says that it takes tremendous energy to overcome the initial inertia and resistance to financial accumulation and get started, but once started, it takes much less energy to keep moving.
- The second corollary of the Law of Accumulation says: By the yard it’s hard, but inch-by-inch, anything’s a cinch. Just start small, and be persistent.
17. The Law of Magnetism: The more money you save and accumulate, the more money you attract into your life.
- The first corollary of the Law of Magnetism as it applies to money is that: A prosperity consciousness attracts money like iron filings to a magnet.
A few coins you have in a piggy bank, magnetized by your emotions of desire and hope, will begin to attract more to you faster than you can imagine.
- The second corollary of this law says: It takes money to make money. You simply can’t attract money until you start accumulating money, no matter how little.
18. The Law of Accelerating Acceleration: The faster you move toward financial freedom, the faster it moves toward you.
This means the more money you accumulate and the more success you achieve, the more and faster money and success seem to move toward you, from a variety of different directions. Everyone who is financially successful today has had the experience of working extremely hard, sometimes for years, before they got their first real opportunity. But after that, more and more opportunities flowed to them, from all directions. Usually, you should expect that fully
80 percent of your success will come in the last 20 percent of the time you invest.
19. The Law of the Stock Market — The value of a stock is the total anticipated cash flow from the stock discounted to the present day.
- The first corollary of the stock market is: Bulls make money and bears make money but pigs get slaughtered. This means that people who invest aggressively when the market is rising make money. People who sell short and protect themselves when the market is declining make money. But greedy people who try to make a killing in the market almost always lose money. More than 70% of “Day Traders,” people who move in and out of the market completely one day at a time, lose money and many of them lose everything.
- The second corollary is: Long term investing in the stock market is the best way to achieve long term financial security.
20. The Law of Real Estate — The value of a piece of Real Estate is the future earning power of that particular piece of property.
- The first corollary of real estate is: You make your money when you buy and you realize it when you sell. Many people think that they will make their money when they sell the property irrespective of how they purchased the property or at what price. This is getting the cart before the horse. The truth is, the more carefully you investigate a piece of property and the more thoroughly you prepare a purchase offer, the more likely it is that you will get the kind of deal that will enable you to sell that property at a profit later on.
- The second corollary of the Law of Real Estate is: The three keys to real estate selection are location, location, location. Your ability to chose a piece of property in an excellent location will have more of an impact on the future earning power of that property than almost any other decision that you make.
- The third corollary of the Law of Real Estate is: Real estate values are largely determined by general economic activity in the area and by the number of jobs and the level of wages. Generally speaking, property increases at three times the level of population growth and two times the rate of inflation. When you purchase property in a fast growing community, you are virtually ensured of above average increases in value.
Before I wish you luck, let me say this:
“Because your own strength is unequal to the task, do not assume that it is beyond the powers of man; but if anything is within the powers and providence of man, believe that it is within your own compass also”
The words are not mine. They are Marcus Aurelius Antonius’s
Good luck!
