Thursday, October 04, 2007

5 Laws of Money

In Physics, there are certain laws which stays true regardless of time, such as the Law of Gravity. When it comes to personal finance, there are also certain Laws of money.

In fact, there are 5 Laws of Money which I like to share with you:

1. Money comes gladly and in increasing quantity to any person who saves at least 10% of his/her earnings (first step to Financial Freedom).

There are only 3 Cashflow Scenarios:

a. You spend more than you earn: This person has negative cashflows and is likely to end up owing other people money (eg. credit cards, friends, relatives, loan sharks).

b. You spend all that you earn: whether this person is earning S$2,00 a month or S$200,000 a month, he/she is still "Just over broke".

c. You spend less than you earn (eg. save 10% of your eanings).

as time goes by, this person will automatically get richer and richer.

Which cashflow scenario do you want to CHOOSE for yourself?

2. Money can work for you, if you become the “wise owner” of money and make money work for you. (note: you’re the Master, money is the slave, while many people are guilty of being slaves to money).

Money is just a tool. We should Love people, use money. The sad thing is there are people who Love money and use people instead.

3. Money will be safe and grow if you invest it wisely or if you invest under the advice of people who are wise in money. ie. investment knowledge is key to making money grow. You can either acquire Investment Knowledge yourself or you can invest money under the advice of people who have investment knowledge.

4. Money will slip away from the man who invests it in businesses or investments with which he is not familiar or not “approved” by people who are wise in money. ie. Ask the opinion of those who are wise in money, they might be able to offer you information or advice that can prevent you from losing money.

5. Money flees the man who falls into scams created by tricksters and conmen, who promise “impossible earnings”. One common weakness of human beings is "greed". Greed can make a person who is usually alert and smart "stupid". Greed can blind a man and is the main reason why financial scams continue to exist whether in ancient times or in the modern day.

By Dennis Ng