A colleague has embarked upon a new property start up over the past 3 years. During this time he has been incredibly successful. Starting and completing many small projects, to deliver what he believed to be a massive profit. In fact, at least double what he could have earned in his previous paid employment (which was at the executive level).
The projects were complete, chickens hatched and it was time to count them. Turns out the numbers didn’t stack up quite that well. Yes it was profitable, at least as profitable as his previous job was. But in truth the sweat and toil was much greater. The net result for him was a broken heart. So much effort, for no real financial upside.
It was time for a sense check. Was it all worth it?
His heart may have been broken, but his back is not. The profits did exist, and the learnings were even greater. The mistakes are known and the upside from here is very significant. All too often we let a broken heart beat us, when in truth the only real thing that should stop us is a broken back. We choose the hard road because it is worth it. The toil and truth is part of the profit. And real profits are far beyond anything financial.
There is no point being a successful entrepreneur, or selling a startup if we have no idea how to handle the money we get. So here is my top 10 financial life hacks.
- Spend less than you earn, no matter what that amount is. The net result is happiness.
- Allocate cash to savings & investments before anything the day you get your profits, pay or dividends.
- Never go into debt for anything which does not appreciate in value.
- The real definition of an Asset: Anything that puts money in your pocket. The accounting definition of an asset is flawed.
- Do not trade stocks. Trading makes the broker and tax man rich and you poor.
- The greatest financial instrument is ‘compounding’. It only happens when we hold assets, not by trading them.
- If you can’t afford a consumer product in cash, you can’t afford it.
- There is no such thing as ‘financial engineering’. It was invented by Wall street to trick you.
- The best type of share investment is an Index Fund. They are investments in civilization. If that fails, we have bigger worries than our money.
- Invest more in education than entertainment & ‘things’ and you will outdo society financially.