James Altucher answers the question of the most important things a person should know about money, and he does it with his own particular outlook and trademark style. All I can say is that I agree with practically every point he lists.
(Also read: 34 money lessons everyone should know)
1. Don’t take a salary. You’ll never make money with a salary.
Although this point may be controversial, there’s a whole philosophy and science behind the claim: people tend to adjust their spending to their salary, and in the end the amount set aside for savings shrinks, and we even “blow” the emergency fund on an emergency that sooner or later arrives. Nobody gets rich on a salary alone. You need to look for an alternative source of income. Altucher clearly prefers working for himself.
2. Don’t misunderstand what investing in the stock market is for.
The stock market isn’t there to create wealth but to preserve and grow it. In other words, you first have to build wealth in order to get rich on the stock market, because you won’t manage it with 1,000 or 10,000 euros.
3. Don’t try to save money by skipping coffee or taking the subway instead of a taxi. That’s a myth. The best way to save more money is to earn more money.
4. Once you have wealth, you’ll never invest more than 2% of it in a single idea.
This claim makes sense, although it’s debatable. Many questions would need to be analysed, but it’s true that someone with little money shouldn’t diversify too much and has to take more risks to make a profitable investment, while someone with a large amount of capital should look for ways to earn a modest return in exchange for a certain degree of safety.
5. Don’t invest in a business with a lot of competition.
Invest in a monopoly business. That means big profits. This advice matches Warren Buffett’s, who always recommends investing in companies that dominate an industry and are very hard for the competition to overtake.
6. Read a lot about things that have nothing to do with finance. Then combine the two.
As we’ve said on a few occasions, sometimes the secret to learning how to sell isn’t found in conventional sales techniques but in the study of human psychology. The same goes for finance: you can learn hundreds of concepts, but when it comes to choosing a good company to invest in, perhaps you should read about technology. Knowing about technology will let you combine it with your knowledge of finance to make an excellent investment.
7. Sleeping 8 hours a day may be the most important rule in personal finance.
And the truth is that a rested body and mind make better decisions of every kind than an exhausted body.
8. Surround yourself with healthy people and cut out the people who bring you down.
It has nothing to do with finance, but removing toxic people from your life will make everything go better, finances included.
9. Gratitude = abundance.
Practise gratitude all day, every day. If you’re grateful, if you feel thankful, that same thing will come back to you in abundance.
10. Financial gurus.
People who really know about finance hide their money very carefully. People who don’t know about finance, the people who are going to deceive you, show off their money on television. You need to be sceptical.
And frankly, I would never trust someone who shows you their bank account to sell you a finance course. Only a complete idiot does that.
11. Trust your body and your unconscious.
In everything you do, and with everyone you meet, ask yourself: “Is this good for me?” Your brain will tell you whether it is or not. Wait for your brain to answer, and follow its advice.
Because sometimes the subconscious is wiser than the conscious mind.
This article is based on a Quora thread answered by James Altucher, adapted and substantially modified.
Read: James Altucher: 32 rules for being a successful entrepreneur (recommended)
Featured image: Jeremy Keith, CC BY 2.0, via Wikimedia Commons.
