In the years since I first penned "Your Money: The Rules," I've come to realize that handling money successfully really is an ever-changing game. I think my first set of Money Rules did a pretty nice job of covering the basics, and they're still just as rock-solid and valid as ever. But I also feel that I missed a few key concepts, and perhaps didn't stress others enough.
It's time to remedy that.
So I'm going to take this opportunity to add to, and expound upon, my first set of Money Rules. You'll undoubtedly note some overlap between the tenets on this page, and those in the previous version. I'm not sure how one could get around that, given that these rules are intended to be pretty much universal and extra-large in scope.
The way I see it, if the concepts are valid, then a bit of brutal reinforcement isn't a bad thing.
I tell you, if people could just stop committing the same mistakes over and over, perhaps they'd actually get somewhere. But no — we take on more and more debt, then manage to pay off some chunk of it, then add even more. And we wonder why cash flow and "just paying the bills" is more of a struggle with each passing month.
Jeez, I dunno. Could it be because we do the same stupid things over and over, yet expect different results?
If you have either (1) ever-expanding, or (2) never-decreasing debt balances — whether it's credit cards, student loans, home-equity credit lines, or whatever — then that's a pretty stout indicator that you're doing it wrong.
Please wake up. It's time to realize that you made mistakes. Because you're human, that's perfectly expected. But you must learn from them. Do the work required to repair the damage.
Or just carry on like everything's sunshine and lollipops, and let the financial noose tighten.
When it comes to money, people are, by and large, idiots. Our consumer-centric, debt-based culture has pretty much assured that. Heck, just watch the news on any given night, and you'll likely figure this out.
So do yourself a favor: Pay very careful attention to the idiots. Watch what they do, and how they do it. See if you can figure out just what it is that they believe, and why it turned out to be so very wrong.
Then set about doing, and believing, the exact opposite in your own life.
You'll thank me later.
(And if it makes you feel better, know that you're welcome to laugh at the idiots, point fingers, and fling poo. In private, of course. Just be dead-on sure that you're not making the very same mistakes, while convincing yourself otherwise.)
This one totally dumbfounds me. How is it that, after seeing all that's transpired in the mortgage-meltdown years from 2008 and later, folks still think that the Citibanks, JP Morgan Chases, and Banks of America of the world are on our side? They are not. If you haven't wrapped your brain around that truism by now, then you haven't been paying attention AT ALL. What have you been reading, anyway?
Do megabanks provide useful and necessary services most of the time? Sure they do. Have they facilitated payment technologies and processes that our grandparents never even dreamed of? Yup. Has our gargantuan debt-based economy, and the systems it requires in order to "expand," made them absurdly powerful? Yes.
Remember: Rattlesnakes provide useful and necessary services, too. It's what they do when you're not paying attention that makes them deadly.
So do yourself a huge favor: Never trust your bank to do the right thing when it comes to your financial well-being. Sometimes they will, but if there's profit to be had in not doing the right thing, well, you can guess which route they'll take. Sad, but true.
Look out for yourself and your money at all times, no matter whose logo decorates your banking log-in page.
You must do this, because no one else will.
Initially, I hesitated to add this as a Money Rule, even though it seems like a no-brainer. The fact is that, for me, once I learned how compounding works, it did wonders for me on a personal-finance level. (I'll save how much in credit-card interest this year? Sweet!)
But when I began to apply it to macroeconomic, big-picture things (think: state pension-fund finances, government debt and spending, etc.), it was altogether terrifying. And not exactly, uh, motivational.
But I suppose that denial just makes it that much worse. Reality won't be avoided, and the math matters. Math will, at some point, always win out. Promises that can't be paid for, won't be paid for — or else EVERYONE will get to pay for them. At gunpoint.
So, with some reservation, I kindly suggest you learn to do math, no matter now desolate the picture it paints may be.
Because ignoring the math (repeatedly!) has put us where we are today.