10 Universal Laws of Money - Rules for Financial Success


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See if you are following the rules for financial success in principle. Enjoy the assessment!

Stephen E. Capizzi, CEPA, CFP®
Certified Financial Planner™

Published in: Economy & Finance, Business

10 Universal Laws of Money - Rules for Financial Success

  1. 1. 10 Universal Laws of Money Rules for Financial Success Financial success doesn’t happen by chance, and wealth building is driven by more than simply saving and investing money. The process is gov- erned by a series of laws and some rules within those laws. While some are philosophical and some are more concrete, the more of these you follow, the better your chance for financial success and reach- ing your retirement goals. Use this as a diagnostic tool for your financial suc- cess. At the end of each section, honestly rank each question on a scale of 1 to 5. (In each case, 5 means that you strongly agree, and 1 means you strongly disagree.) Law One: THE LAW OF EXPECTATION All individuals have a potential for prosperity and financial freedom when they expect and plan for them. This philosophical law is simply summarized: “You don’t always get what you want in life, but you always get what you expect!” It’s a self-fulfilling prophecy, and your expectations about money apply. The way you think about money and your attitude about money determine your financial future. Self-assessment Do you have a positive attitude about money? *Your score (1-5): ____ Law Two: THE LAW OF COMMITMENT Money is a trust that we must choose to manage wisely, productively, and honorably for our own good, for our families, and for others. What is the purpose of money in your life? Many people never stop to think about that question, or they view it only in terms of purchasing goals. As with any trust, it must be managed to achieve the designated outcome. You are the beneficiary of your income, and you are responsible to use it to meet your needs; no one else will do that for you. This responsibility means not squandering money on useless things, but rather protecting your capital, including building sufficient reserves for emergencies, planning for retirement, and properly caring for the assets in which you have invested such as your home. Self-assessment Do you feel you are responsible with your money – occa- sionally (1), most of the time (3), every dollar (5)? *Your score (1-5): ____ Law Three: THE LAW OF CONTROL While each of us has a potential to live prosperously in constructive control of our financial affairs, this potential becomes a reality only when we live in har- mony with proven principles of financial success. Achieving financial success is impossible without being in control of your money. In order to do that, you must live in harmony with three known money basics: • Money Basic #1: Money Consciousness – You must be aware of the financial implica- tions of every decision you make. Consider- ing cost should be routine, automatic and natural in making every decision, every day no matter if the expense is large or small. • Money Basic #2: Live on Less Than You Make – Define exactly what you need to live on, and dispense no more. • Money Basic #3: The Opposite of Spending
  2. 2. Is… – Consider your savings payment as you do your mortgage payment or rent. View it as a necessity and make the payment religiously. Wealth Accumulation Rule: Pay yourself first, not the piper. Wealth Accumulation Rule: Save for a rainy day. Have an emergency fund. Self-assessment Do you consider every cost, live on less than you earn, pay yourself first and have an emergency fund? *Your score (1-5): ____ Law Four: THE LAW OF MANAGEMENT Asserting control over our financial lives requires us to manage our personal finances as we would those of any important business, utilizing basic manage- ment skills such as goal setting, planning, organiz- ing, record keeping, allocating resources, evaluat- ing, and decision making. If you were the CFO of a company, you would have no trouble remembering that your priority is to the health and prosperity of the company. In reality, you are the CFO of a very important company: You, Inc. You must acquire and adhere to four money management skills: • Money Management Skill #1: Set clear goals. What are your money goals? o Earnings goals o Savings goals o Vacation goals (or similar discre- tionary spending) o Retirement goals • Money Management Skill #2: Precise Plans Goals setting is the first step, and plan- ning makes goal achievement possible. Consider the investment of time and money involved in your plans and ask this very personal question: Is it worth it to me? Answering honestly helps you eliminate regret and make better choices. • Money Management Skill #3: Organization Proper organization reduces the amount of work required. Good organi- zation doesn’t take time; it makes time. As the president and CEO of You, Inc., you have absolute authority to choose the best organizational procedures for you own money management, and all else being equal, simple is best. • Money Management Skill #4: Record Keeping While tax filing looks backward, you must be focused on today and tomor- row. Keep your financial records up-to- date and easy to access at all times. Financial Success Rule of Vision: Set specific goals and measure each quantitatively. Financial Success Rule of Sufficiency: Create a plan that is capable of the result. Self-assessment Do you feel you have clear goals, plans to meet those goals, and an organizational and record-keeping system that enhances your ability to meet your goals? *Your score (1-5): ____ Law Five: THE LAW OF FINANCIAL FREEDOM Financial independence is not generated by tempo- rary levels of wealth or income but by setting cor- rect priorities, exercising self-discipline in financial decisions, living debt free, effectively managing resources, and claiming it as an emotional and mental attitude. A particular amount of money or income level does not define financial freedom. A person earning $50,000 can have as much financial freedom as one earning $500,000. Financial independence comes from being free of the limitations you experience because of financial entanglements. • 1st Key to Financial Freedom: Set Priorities Choose to save rather than choosing to spend. Without saving, financial success is impossible; with it, success is almost inevitable. • 2nd Key to Financial Freedom: Self- discipline Delay spending. There are many benefits: o Not all impulses reflect real needs or desires. o Buying later provides opportunity for research and to buy more intel- ligently. o Alternative products or sources may offer better value. o You will feel more in control when you spend intentionally rather than impulsively.
  3. 3. o You’ll avoid a lot of stupid mistakes with your money. • 3rd Key to Financial Freedom: Living Debt Free Despise debt like the enemy it is. People without debt get to save and invest more. Change your attitude about debt and deter- mine to eliminate it – You will revolutionize your life. • 4th Key to Financial Freedom: Manage Resources Tracking your income, expenses and ob- ligations is the beginning. Ensuring your money is being used where/as it should is the middle. Evaluating results, making decisions about the future, and guiding your financial situation toward your goal is the end. • 5th Key to Financial Freedom: Attitude of Freedom Claim financial freedom as your personal and emotional attitude. If you have all the money you need to meet your necessary ex- penses, if you know how and remain firmly committed to avoiding any unwanted finan- cial obligations, and if you have more than enough money to do the things you really value in life, why shouldn’t you feel a sense of freedom no matter the absolute level of your resources? Here is an important concept to consider: Many financial advisors promote the irrational idea that financial independence means being able to do anything you want, any time you want, without regard for the cost. There are many high flyers in the world, but clearly many of them are slaves to their life styles and many of them have no sense of happiness and freedom. Ask yourself what really makes you happy. The truth is that most of what brings us joy takes no money at all. Financial independence primarily means being able to live the life we choose, free from obligations we cannot easily meet with or without what we nor- mally call our “job.” Self-assessment Do you feel you have financial priorities and self-disci- pline, well-managed resources, the ability to live debt free, and true financial freedom in that you are not a slave to your lifestyle? *Your score (1-5): ____ Law Six: THE LAW OF PRODUCTIVITY Each of us prospers in proportion to our productivi- ty as we increase our moneymaking skills and direct them toward long-term personal benefits. Our time is worth nothing. Only what we do with our time matters. If you want to get more money for your work and increase your income, improve your productivity. Get more done. Increasing productivity in a busi- ness increases profitability; increasing productivity at You, Inc. must also be your focus. Financial Success Rule of Skill: The ability to effectively use the knowledge that is available. It’s not what you know; it is how you use what you know. Put to use what you know and make it pro- ductive. Self-assessment Do you feel you are getting sufficient information and putting it to use in a productive and useful way? *Your score (1-5): ____ Law Seven: THE LAW OF SELF DISCIPLINE Prosperous people do honest work for their money, expect fair compensation for their work, and under- stand how money works in the real world. Self-discipline recognizes the fact that success- ful people accept the fact that they are personally responsible for the course of their lives. They have no time for the blame game. Consider the source of your information. It is your responsibility to act on correct information. Financial Success Rule of Will: The ability to put effort against the work and tasks needed to achieve your goal. Self-assessment Do you feel you take full responsibility for your success (and failure) and are willing to do what’s needed to meet your goals? *Your score (1-5): ____ Law Eight: THE LAW OF ENTHUSIASM Becoming a productive, effective, and prosperous person can and should be a lot of fun. Here’s a must-read: a little book entitled, Money is My Friend, by Phil Laut. In it you will learn how to develop a light-hearted attitude and sense of self- reliance about your finances. How can you make money fun? • Make money fun by accepting responsibility.
  4. 4. 11175 Cicero Drive Suite 100 Alpharetta, Georgia 30022 Phone: 678-242-5250 Fax: 678-242-5201 steve@cfaplanning.com www.cfaplanning.com • Make money fun by focusing on financial goals. • Make money fun by celebrating financial achievements. • Make money fun by acknowledging your success. Every individual can become successful with and learn to enjoy money if they will just decide to learn how. Self-assessment Do you feel your attitude and perceptions on managing your money are fun and positive? *Your score (1-5): ____ Law Nine: THE LAW OF PATIENT PERSISTENCE Success with money requires persistence and pa- tience as much as it does knowledge and skill. Patient persistence is underscored by the magic of compound interest, and that is really the magic of delayed gratification. A common success factor is how far people plan into the future, and there’s good news: Persistence and patience are not mysterious qualities that you either have or don’t have from birth. They are a matter of choice, a choice anyone can make. No matter what your goals are (start your own business, pay off credit cards, eliminate your mort- gage payment, retire at 65… or even 55), they will require persistence and patience. You must begin. And you must consistently work at rejecting instant gratification in favor of delayed gratification in order to achieve each goal. In the end it pays, and it pays big time. Financial Success Rule of Sustainability: The ability to maintain the plan until your goal is reached. Self-assessment Do you feel you have been patient and persistence in working towards your goals in the past? *Your score (1-5): ____ Law Ten: THE LAW OF TRUE WEALTH Real prosperity is measured as much by how we use our money as it is by how much we have. Being wealthy or rich is a state of mind more than material prosperity. Stay focused on lowering your financial obligations to build wealth. Stay focused on what you value, and keep your eye on life… not on material prosperity. Wealth Accumulation Rule: Stiff the tax collec- tor – if you get a windfall refund, you’re overpaying taxes and giving the government an interest free loan. Wealth Accumulation Rule: When investing, match your asset mix to your investment personal- ity and tolerance for risk. Don’t involve emotion in your investment decisions. Wealth Accumulation Rule: Diversity reduces adversity. Self-assessment Regardless of your material prosperity, do you feel are you truly wealthy in the use of your money? *Your score (1-5): ____ Final Score: Average all your scores _____ If your score is: 5: Congratulations. You are abiding by the laws and on your way to financial success. 4: You’re better than average, but with a little work, you can achieve wealth. 3: You have work to do, and the time to get started is now. 1-2: You have a lot of work to do, so get the help you need to turn your life around. Stephen E. Capizzi, CEPA, CFP© The certification marks above are owned by Certified Financial Planner Board of Standards Inc. and are awarded to the individuals who successfully complete CFP Board’s inital and ongoing certification requirements. Copyright © 2012 CORE Financial Advisors, Inc.