Know How The Economy Works: When does the interest rate generally go up? When does it go down? What are bonds? What’s inflation? When do you get inflation? What’s the market cycle? Why do economies generally collapse? Who prints money? Why do they print money?
You don’t have to be an economist. Read a book like A Random Walk Down Wallstreet by Burton Malkiel. It’s a great summary of how the economy and investing work.
Avoid Personal Debt: Personal debt destroys your net worth like nothing else. If you want to start a business or do big real estate deals, it’s often necessary and smart to take on debt. But we must be wise about taking on debt. Try not to borrow money for things that decrease in value. When it comes to more complex things like starting a business, investing in real estate, or even your education, think carefully before you go into debt. Borrowing money is not free.
Save As Much As You Can: Avoid debt and save as much as you can. Personal finance is called personal finance for a reason. Your money strategy depends on your age, personality, a place you live, education, experience, etc. A person who lives in Manhattan probably can’t buy an apartment. It’s overpriced, and renting is probably smarter.
Buying an apartment makes more sense in a city with lower real estate prices. In that case, renting is more expensive. No matter what you do, always make sure you have enough cash so you can make an investment if you spot an opportunity.
Have A Short-Term Strategy: Your investment strategy should be focused on the long-term. But that means you also need to generate income today to pay the bills. How do you do that? That’s your short-term strategy.
One short-term money strategy is based on improving your skills and creating multiple income streams. Invest in your personal education because more skills mean more earning power. Also, don’t rely on one big paycheck. Instead, have multiple ways to generate value. That means less risk. If one income stream disappears, you’ll still have others.