- There are 4 money corners to think about: save, spend, tax, and invest.
- If you save 15% of your income first, then look at spending on your needs, then your wants last, you will be in good financial shape.
- Diversifying your investments will ensure you are able to better handle an economic downturn.
I like 4’s. You have 4 cardinal directions: north, south, east, and west. And there’s the 4 seasons: spring, summer, fall, and winter. Likewise, we have 4 money corners: save, spend, tax, and invest. Let’s take a look at these 4 corners:
- Save. People who have successfully built wealth have done one thing and one thing only: save first. A good rule of thumb is about 15% of your income. If you save that first, you will be in great shape.
- Spend. If we save the first 15%, now we want to take care of our needs next, and finally our wants. Do them in that order, 15%, needs, then wants.
- Tax. In the 1930s, the Honorable Learned Hand said, “In America, there are two tax systems: one for the informed and one for the uninformed. Both are legal.” I want to be in the informed camp, and so do you. Make sure you understand what’s going on so you can reduce those taxes.
- Invest. With investing, we compartmentalize in to short, intermediate, and long-term investments. When we do that, we want to make sure that we diversify between cash, debt, equity, bonds, and stocks to ensure we don’t put everything in one place. That way, if the economy or markets tank, we don’t have our money all in one area.
So when you come to an intersection in life to make a money decision, look both ways and think about these 4 areas and you’ll make really good, smart decisions about your money and build your wealth successfully!
Until next time, enjoy!