7 Money Rules You Must Know if You Want to Become Rich

Haris Mohammad


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Many bad things can be said about the pandemic and the financial crisis we are going through. But there is still some good we extract from it.

It has exposed how financially vulnerable most of us are, even those who thought they had the security of their monthly paychecks. It has forced people to rethink everything they know about how money works and how they can (and should) earn, manage, and grow their money. And it has shown us how unpredictable and challenging the future can be.

So if you — especially if you are in your 20’s or 30’s — can use this moment as an opportunity to upgrade your mindset and knowledge, you will be better placed to face the future that will bring even more drastic and lasting changes.

The good thing is it’s not a very difficult task. Most people’s money problems emerge from the fact that they are so busy trying to earn a living that they never care to learn about money. That means if you can understand and follow a handful of simple rules, you will have a huge unfair advantage over the vast majority of the people.

So let me share with you five money rules that I have learned over the years, especially in the seven years since I quit my job and became self-employed.

1. Lifestyle inflation

After passing out of college, I started working for John Deere as an engineer. During the four years I worked there, my salary saw a two-fold increase. But my lifestyle kept up with my salary. So when I quit, I didn’t have much in the name of savings.

This is a massive problem for most people. And that’s what makes financial freedom and security so elusive for them.

Look, if you don’t have any savings, you have no cushion to protect you from the shock of an unexpected rise in expenses or a fall in income. But that’s not all. With no savings, you can’t even think of taking an extended break from your job to try something else like changing careers or starting a business. And you can’t invest, which is the key to long term wealth and riches.

Also, increasing your expenses is easy. But you get used to better and more lavish lifestyles very quickly. And then bringing your expenses down becomes too painful. So no matter how much your income grows, keep a tab on your expenses. Have a lifestyle that’s good enough, but that also allows you to save and can be maintained even if things go south.

2. Money and boredom

Even when people manage to save some money using all their middle-class frugality, that money often sits idly in their bank accounts, bringing little or no gains.

I did that for a few years and realized there were two problems with that.

  1. Since the government keeps printing more and more money (for good and bad reasons), your money’s purchasing power keeps going down. In other words, the money in your checking account loses its value over time.
  2. Idle money is both easy and tempting to spend on useless things.

Patrick Bet-David, entrepreneur and creator of Valuetainment, says money needs to be moved and will leave you if it gets bored. He adds —

“If money stays in a checking account, the money goes to somebody that knows how to use it. Money doesn’t like to stay somewhere where it’s not working. So it goes to someone else that knows what to do with money. So you have to make sure that money’s always moving for you, working for you, and doing something to create more money for you.”

3. The debt trap

Credit cards have made debt a normal part of people’s lives. And they are fine if you know how to use them. But debt is something you should use only with extreme care and caution.

Going into debt for things that depreciate over time (a car) or for luxury (a holiday) or showoff (pair of fancy shoes) is like exposing your financial health to a deadly virus. And at least today, we can all agree it’s not a good idea.

The biggest problem with debt is it masks the issues in your present and often adds some big ones to your future.

4. The sweetest earnings

Most people trade their time for money. That accounts for 90 percent or more of their income. Try not to be like most people.

You have only a limited number of hours in a day, So if you’re trading your time for money, there’s a limit to how far you can go. I’ll let you do the math. But there’s more. The more time you spend earning, the less time you will have left to enjoy your life. Plus, if something comes up and you can’t work for more than a few weeks, your earnings stop!

The good thing is you don’t need to invest significant capital to make good money without having to sell your time. You don’t even have to quit your job. Today, it’s easier than ever (it still needs some hard work though) to create healthy passive income sources — money that keeps flowing in with little or no effort on your part.

One great way to do that is to create digital products that you can monetize. Here are a few examples:

  • Write code — create games, tools, or websites
  • Write — blogs, articles, or books
  • Create art — paintings, music, or videos
  • Create online courses — you don’t need to be an expert. Find the right information, contact experts, and put it all in an easy to understand language.

It will take time, and you may have to try more than once, but when you succeed, you will be making money while you sleep. And that tastes the sweetest.

5. The good leverage

Finance guys use the word “leverage” to mean borrowed money. But I have already made it clear I don’t like debt. I am talking about the good kind of leverage. To me, leverage refers to things that can maximize your gains and impact without adding much risk.

Most people allow their lack of knowledge, time, connections, etc. to become a hurdle in their pursuit of money and success. I was as guilty of this as anyone else. Until someone told me if I continued doing that, I would never be able to do anything great. Today, I live by a simple principle — most things you will ever need are just a few phone calls or mails away.

If you don’t know something, find and ask those who do. If you don’t have time, find people to help you. If you don’t have connections, maybe your friend has. If you don’t have an audience, piggyback on someone else’s audience. Start looking for resources beyond what you own. And I am not asking you to be a parasite. If you do it well, everyone benefits and is better off.

But above all, market yourself, build an excellent reputation, and protect it with everything you have. And never sell yourself short.

6. Assets

Before I talk about investing in assets, I must state that before making any such investments one must learn about it enough to make good choices or seek professional advice.

That said, the game of money is a long-term game, and apart from building a great company, nothing is more rewarding in the long term than owning and holding good assets.

Some of the wealthiest people I know personally are those who had bought large pieces of land or houses at dirt-cheap prices (not in times of bubbles) and then held them for decades. With time, property prices shot through the roof, and their net worth exploded in value. Mark Twain had rightly said — “Buy land, they’re not making it anymore.”

Another great option is to buy shares of good companies and patiently hold them for years or decades. Those companies use all their resources to make money for you and others like you who have invested in them.

Here’s some advice from Warren Buffet.

“All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.”

But again, please learn before you start investing and keep learning even after. Learn from books, learn from people, learn all you can. And start small.

7. The best investment

You are the center of the system responsible for your money, success, and happiness. And if you want that system to continue producing outstanding results for a long time, you must invest generously in yourself.

So take good care of your health, nurture your relationships, and work to expand your knowledge. These are the things that offer the greatest returns and are the most difficult to take away.

In a nutshell

Not understanding the rules of money is among the costliest mistakes people make in their lives. Here are the seven rules I have learned.

  1. Don’t acquire a lifestyle that wouldn’t let you save and would be unsustainable when a crisis hits.
  2. Move your money around and make it work for you.
  3. Avoid debt.
  4. Create passive sources of income.
  5. Be resourceful.
  6. Buy and hold good assets for massive long-term gains.
  7. Invest in yourself

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Coach, Engineer, Writer.

Seattle, WA

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