10 Millionaire Money Principles You Must Use | How To Be Rich and Successful in Life


Here’s what you need to know
millionaires live by different money principles and the majority of people
and by leveraging these principles they are able to amass more wealth than you
could ever imagine you see they possess information that
most people don’t and this financial education is what allows them to have a
leg up over the competition when it comes to being financially well-off
luckily boss in this video I’ll share with you the ten money principles all
millionaires follow and if you’re new to the channel then hit the subscribe
button below for more life-changing content in order to fully grasp the
importance of these money principles we will follow our friend Steve as he
progresses through his financial life considering how we will use these money
principles one by one money principle number one the first
year rule Steve’s financial journey starts in
college one of Steve’s main goals in college is to avoid graduating with an
insurmountable amount of debt and in his readings he comes across the concept to
the first year salary rule this rule states that you shouldn’t take out more
in student loans than you expect to make in your first year on the job as an
accountant Steve expects turned $40,000 a year
after graduation which is the max he can take out as a student alone
unfortunately Steve really wanted to go to Harvard for his MBA but with the cost
of 72 thousand dollars a year this would definitely break the first to your rule
so instead Steve decided to pursue an in-state program that cost him only ten
thousand dollars a year by making this choice
Steve gains the ability to avoid massive student debt payments upon graduation so
that he can have more money to set aside for saving up for a house or investment
now while things worked out for Steve he realizes that being able to follow the
first year rule isn’t always feasible rising tuition rates have made following
this rule a challenge and the uncertainty of the job market makes it
hard to gauge just how much you will make upon graduation money principle
number two budgeting now that Steve has started his career he figures that as an
accountant he should be setting up a robust budget to help amanda’s his money
he remembers his accounting professor talking about the fifty thirty twenty
rule and decides to give it a try his budgeting technique works by
dividing your income in the following ways fifty percent is designated to
living expenses like rent utilities and groceries the next thirty percent goes
towards end payment costs like going up to eat or
seeing a movie the final 20% is meant to go right into your savings account
Steve would always get flustered when trying to set up budgets in the past but
by breaking up the budget in two basic categories he found this method to be
quite simple to follow when thinking further about his new habit of budgeting
he had the thought that this budgeting met who would probably not work for his
friend Kyle you see Kyle lives in New York City where housing is very
expensive even living in less expensive parts of town means that he would have
to spend upwards of 60% of his monthly income for living expenses
moreover call doesn’t go out much so we probably wouldn’t need to allocate 30%
of his income towards entertainment which if reduced to 20%
would allow him to still hit the 20% savings target that is standard in this
budgeting technique in essence Steve realized that budgeting is great but
only if it is adopted for your own personal financial situation money
principle number three the emergency fund rule now that Steve has a budget in
place and is paying down a student debt he figures he should take another step
in improving his financial situation while Steve has a relatively secure job
he’s been hearing others talk about how certain industries have been laying
people off and wonders how we would survive if he himself was terminated
sure he was saving money every month but he really didn’t have much of a
financial nest egg to fall back on Steve took it upon himself to research how
much a typical person has set aside for emergencies and some best practices when
he learned shocked in a Federal Reserve study conducted in 2019 found that
almost 40% of American adults wouldn’t be able to cover a $400 emergency with
cash savings or a credit card charge that they could quickly pay off about
27% of those surveyed would need to borrow the money or sell something to
come up with the $400 and an additional 12% would not be able to cover it at all
– Steve $400 seems like a rather low amount of money to have in reserve for
instance if you had to visit his family across the country just a plane ticket
alone would cost at least $1000 not to mention the loss of income from being
away from work Steve came to learn that having at least 6 months worth of living
expenses was a practice most financial guru suggested however Steve being the
cautious accountant that he is figured that just to be safe he
would save up a year’s worth Akash and leave it in his high interest savings
account money principle number four the age rule being interested in finance
Steve always looked up to the great investors like Warren Buffett and
Charlie Munger and after a few years into his career he decided that now was
a perfect time to start investing in a second year finance course Steve was
taught the Aged rule which seemed appropriate to apply to his new
investing endeavor the Aged rule is where you subtract your age from 120 and
whatever is left is the percentage of your investments that should be put into
stocks as a 28 year old this meant that Steve would be allocating 92 percent of
his money toward stocks and other eight percent towards bonds Steve remembered
his teacher explaining that when you’re young you have more of a time horizon
for investing meaning that you can afford to invest in more risky
securities whereas when you’re older you want to focus your investments are more
secure assets like bonds Steve thought to himself that his parents must invest
a lot more heavily in bonds as after age of 64 means that they would have 56% of
their money in stocks any other 44% in bonds upon investing in these stocks
Steve figured that it was only a matter of time before his wealth grew to the
size of his idols Buffett and Munger money principle number five the ten-year
rule after five years of working downtown Steve decided to change jobs
and with this job change meant that he would now be able to drive to work Steve
was excited for this change in his routine but began to contemplate whether
he should buy a new or a used car he heard that the value of a new car
dropped significantly right after you buy it but still felt tempted to get one
that was new anyways after talking with his dad Steve was made aware of the ten
year rule this rule says that if you want to maximize your car’s value you
should either buy used or buy new and drive the car for ten years
in essence the rule minimizes your depreciation hit if you buy a car that’s
a few years old the depreciation will already have been sucked out of the
vehicle if you buy a new car and keep it for a decade you’ll have optimized its
value and the depreciation won’t matter as much well Steve did initially want to
buy a new car he figured that buying used was a way to go this buying
decision made him think of his friend Mike who always bought his cars new not
only did he buy expensive cars but he would sell them after just a few years
which made Steve cringe at the thought of
how much money his friend was wasting year after year Steve also figured that
even if the used car II were to buy didn’t last ten years he would still
have bought it after a lot of the depreciation had already been incurred
which for a savvy accountant made him very happy
money principle number six the twenty-four ten rule now that Steve knew
he wanted to buy a used car he needed to decide how to pay for it should he
finance a full cost part of the cost or wait until he could buy the car outright
what Steve came to learn was that when buying a car you should follow the 44:10
rule this rule states that you should put at least 20% down also you should
finance a car for no more than four years and spend no more than 10% of your
monthly gross income on transportation costs Steve really liked this rule
because it keeps you from buying more vehicle than you can afford
it also takes your ongoing budget into consideration by calculating total
transportation costs these types of costs not only include your car payment
but I’ll see your gas and insurance which can vary by vehicle Steve really
felt like this rule is practical for him but wondering how it would work for his
friend Justin who drove for work obviously his transportation costs will
be much higher than the normal person every month but he still felt like the
20% down and for a year financing parts of this rule could easily apply to
everyone moreover because Justin was a key and saver he knew that he could
probably afford to buy his car in cash which meant saving interest charges
associated when you finance even if it is only for a period of four years with
all this information in mind Steve was confident that he would end up with a
good car at an affordable price money principle number seven the income rule
after about five years of renting his current apartment Steve became fed up
with paying someone else’s mortgage and wanted to look into buying a home with a
few raises and promotions at work Steve was now earning $80,000 a year and
figured it would be enough on a monthly basis to support the costs associated
with home ownership as long as he bought a home he could reasonably afford his
friends who had bought houses in the past mention that the rule of thumb is
the income rule which states that you should not buy a house that’s prices
more than three times your gross annual income for Steve this meant that he
could afford to buy a house worth two hundred and forty thousand dollars Steve
was happy with this price range as he definitely did
wanna be house poor but again thought of his friend Kyle who lives in New York
City the income rule didn’t seem practical for Kyle as houses in
Manhattan were millions of dollars and Kyle well very successful wasn’t making
enough to follow this rule steve rationalized to himself that this is
just a rule of thumb and not an absolute rule which means it won’t apply to
everyone’s unique situation in some cities using this rule makes sense and
in other cities where house costs are inflated people will have to spend four
or five times their gross salary to get into a home with this in mind see was
just happy that there were many homes in his city that met this criteria money
principle number eight the 20% rule after spending a couple months looking
for a house to buy Steve finally found the perfect home at two hundred and
thirty thousand dollars it followed the income rule and now Steve had to decide
how much to put down in order to buy the home Steve had been saving up for this
purchase for years and had always been told that you must put down 20% on your
home Steve liked the idea of putting down a
large sum of money because he could then reduce his monthly expenses allowing him
to still have cash available if he wanted to go on vacation or buy a new
wardrobe moreover putting 20% down allow Steve to
avoid paying private mortgage insurance which was a non recoverable cost he was
happy to avoid money principle number 9 the 10% rule a few years after buying
his home Steve’s house gained two new roommates his wife Angela and baby
daughter Sarah with these new additions in his life Steve found himself thinking
more and more about retirement with his parents having just retired Steve
decided to ask his mom for retirement planning advice she explained that since
she was Steve’s age she put away 10% of her monthly after-tax income into a
retirement savings account via her employers 401k
however she recommended that Steve really considered what kind of a
lifestyle he would want to live in his later years
for instance if he wanted to travel the world to retire early then he would have
to increase his monthly contributions in order to support this lifestyle money
principle number 10 the 25 times rule after talking with his mom Steve felt
unsure whether saving 10% of his monthly after-tax income was enough to cover
southern costs so he decided to project just how much you would need to save in
order to live off the returns from his see figured that expecting a 4% return
annually on his investments was reasonable
this meant that Steve would have to save up 25 times his annual living expenses
before he could retire Steve knew that his mortgage will be paid off well
before retirement and then he was going to continue living frugally into his old
age as such he estimated an annual of any expense of $70,000 as the cost of
living will continue to climb as the ages
meaning that he would need 25 times that amount or 1.75 million dollars to retire
with all these money principles set in action it was only a matter of time
until Steve amassed significant wealth proving that these financial tenants are
key to living your best money life thanks for watching if you want to go
from the life you have to the life you deserve then hit the subscribe button
now

16 thoughts on “10 Millionaire Money Principles You Must Use | How To Be Rich and Successful in Life

  1. 20/4/10 to me is usually 50/1/5 rule, which is really great. Has been helping me manage my car expenses very effectively. Nothing is impossible in good financial management.

  2. I have watched this channel over a period of time, and I find that you really incorporate people advice from their comments. Keep going!!

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