My Top 9 Money Tips I Wish I’d Known Sooner
I have created my dream life.
That is, money has created my dream life. With a bit of help from me.
I live in Portugal with the freedom and lifestyle that I desire.
But it has not always been like this. Far from it. In a way, I have lived two lives.
One with a 9-5 (more like 9-9), a lack of money and an inner-city lifestyle in Copenhagen, and another life with financial freedom to live the way I wanted.
I wish I could have avoided the first life. I wish someone had taken me aside and given me this money tips I’m about to give you, so I could have followed it from the start and achieved my dream life sooner.
When I was growing up, I got advice about friendships, about exercise, about health, about cooking – but there was never really anyone who gave me advice about money, even though I grew up with a father who was an economist. Go figure.
Sound Money Tips are Worth Their Weight in Gold
It wasn’t until I was fired that I really understood how important it is that we have a strong financial foundation. That we plan our financial destiny.
I learned to manage my money in such a way that it grew rapidly – for me instead of against me.
In this blog post, I’ll go over the most important lessons I’ve learned about money – that I wish I’d known from the beginning.
1. Understand That Money Can Actually Make You Happy
As someone posted on social media the other day,
“They lied to you when they said money couldn’t make you happy,” …followed by a list of wonderful things money can buy you, like health insurance and vacations.
I had to laugh because it’s kind of true.
I have lived with money and without much money. I have been a mother on unemployment benefits, and I have been a mother with 7-figure income.
I can tell you that being a mom with a 7-figure income is way more fun.
The difference? Everything!
I used to live in a one-bedroom flat in central Copenhagen, and I couldn’t afford a holiday or a babysitter or cleaner or a car. I wanted to get away from the noise of the city, but I couldn’t afford to buy a house in Denmark that wasn’t in the middle of a rye field.
Today I live in a house 30 minutes outside of Lisbon on the coast of Portugal.
I have an au-pair to look after the boys and a maid to clean and cook. I don’t even drive the boys to school anymore.
I can’t remember the last time I was stuck in rush hour traffic, mopping the floor, or making pasta.
I regularly go out to events and dinners – without having to beg a relative to look after my children.
No, money can’t shield me from a heartbreak or make sure my kids don’t fall riding their bike. But money can make sure I have time to go on a date and time for a fun bike ride to the beach with my kids.
2. Invest as Early as Possible
Many people don’t invest until:
A. they have enough money,
B. they have enough time,
C. or they get their act together.
Forget it. Just do it.
Get started right now. Today.
Buy a tiny little share in a tiny little company to get you started. See your first investment as a kind of learning fee and stop worrying about whether you will lose money.
The first investment is important because you realize it’s not that risky or dangerous or hard.
3. Invest in Your Education as an Investor
Yes, you can read blog posts and books, and of course you should.
I have been investing since I was 30 years old in an autodidactic way. I had a decent ride, in particular because I invested a lot during the financial crisis – but my finances really took off when I bought a good value investing course where I learned to pick companies.
You can easily learn passive investing in indexes on your own. But if you want to become excellent at selecting companies, going through a checklist and understanding how to figure out what they are worth, you have to take a course. (Psst… did I tell you that I’m about to launch a value investor school?)
Why don’t we learn about money and investments in school? I think I have the answer.
I once attended an introduction at one of the Denmark’s most prestigious private schools. There was a whole army of top-level government workers in suits and nice dresses there to hear about the school.
The headmaster explained that the school had a high academic level, and their role was to educate the children so they could attend college and subsequently enter the labor market.
Suddenly it struck me that the school is actually a factory of office workers who will receive a monthly salary. They are creating fodder for the labor market.
It’s not the school’s role to give children the knowledge or tools to become entrepreneurs or investors.
4. Understand That Being an Employee Is Risky
Most people focus on getting an education and a good job.
It feels safe and secure… unlike investments or entrepreneurship, which many people perceive as risky.
The idea is that you could potentially lose money by investing or starting a company. Therefore, it’s considered a risk.
But you can lose all your income if you are an employee. You can get fired.
In one swoop, your financial foundation changes.
With one person’s decision.
Now that’s really putting all your eggs in one basket. That’s risky.
5. Pay Yourself First
The very first thing you should do every month is withdraw money from your salary income for yourself and your future.
Why first thing?
Because that’s how you prioritize saving to build assets.
If you expect to save money from what’s left at the end of the month, you probably won’t get it done.
We tend to use the money that is available in our checking account. That’s just how most people operate.
6. Make Sure You Have Multiple Sources of Income
A salary is just one of several sources of income.
Stocks are another.
Can you think of more? A small online business?
Building your own company?
Renting out a property?
7. Avoid Debt
Do everything you can to avoid creating liabilities – that is, anything that pulls money out of your finances. This could be, for example, debt with interest payments.
Avoid all unnecessary debt, such as consumer debt and the installment plans when you pay for electronics. Pay upfront for the stuff you want.
The only kind of debt I would consider is a mortgage.
You should also avoid debt when investing. It makes you nervous as an investor and you may be blown back to square one if the market goes against you.
8. Invest When Others Flee
There are periods when investing feels like a downward slide with no bottom.
It’s precisely at this point that you must find the courage to bet on the companies that you believe in.
Of course, it’s important to do your homework so that you’re sure it’s a good investment.
You should take the company through a checklist – you can use mine here – and calculate what it’s really worth. You can learn about that in my e-book here.
9. Stick With It
The other big mistake people make is selling too early, either:
A. as it drops,
B. as soon as it has recovered after a drop,
C. or too soon, in terms of a rising star.
The money is made in the waiting.
So hold on, be patient, wait.
You look after the plant and water it, but you don’t have to stand and stare at the plant all the time.
Read my e-book Free Yourself to learn about the investment strategy that I use with great success. You can download it here.