Rule #1: Separate money beliefs from facts.
Money is a means of exchange. That’s it. Everything else is happening in your head. Your knowledge about money is not fact based, but based on family and personal experience and beliefs, social norms, marketing and media stories. You develop a money mindset that is leading your actions. If you think: “I will never have money” – guess what: You will never have money. Being aware of your money mindset gives you the opportunity to change it in your favour.
To do: Learn as much as you can about money from different sources like blogs, financial and business magazines, books, TED talks etc. Never follow the advice of parents, friends or bank clerks, unless they live like you want to live.
Rule #2: Know what you want.
If you know how you want to live, you can make money your tool. Otherwise money is making how you live.
To do: Create a vision board to get inspired by your own dreams.
Rule #3: Know your numbers.
If you like food, but don’t like cooking, you can eat outside. You pay for it, and you immediately know if the food is good or not. If you like money, but don’t like numbers, you can let someone else manage your money. Bad idea. The thing about money is that you not only pay the people who take care of your money, but you can never be sure that they really act in your interest. If you let other people manage your money, you might realize one day that they did a bad job, but then it’s too late. There is no way around the fact that you have to take care of your own money. And dealing with money is dealing with numbers. It’s in the nature of money, so there is no way around this either. And it’s getting worse: There is maths involved. The good news: There is always a digital tool that is doing the maths for you. And hey, most of them are even for free. So take a deep breath and off we go: Do you know the numbers of your assets? Your monthly income? Average monthly spending? Your monthly/yearly budgets on fix costs, food, leisure, holiday etc.? The part of fix costs and flexible costs?
To do: Do your asset allocation, a monthly book keeping and set up budgets.
Rule #4: Pay yourself first, then everything else!
Waiting until the end of the month and see what money is left never works. Turn it around and pay yourself first. The payment to yourself is the money with which you achieve your financial self-determination, with which you can pursue your goals and make dreams come true. It is the most beautiful expense you have. Only for you. You will never regret it, never throw it away, and it will reward you by growing.
To do: Take 10 percent of your monthly income at the beginning of the month and invest it in something that will grow. (Build your three month reserve first, see rule #5; for investments see rule #10 and rule #11.)
Rule #5: Have a three month reserve.
One of the questions in the financial literacy toolkit published by the Organisation of Economic Cooperation and Development (OECD) (OECD) veröffentlichten Financial Literacy Toolkit is the following: How many days or month can you cover your living costs if you lose your main source of income without lending money or moving house? It is not surprising how few people in developing countries can survive one or two month without income, but to me, it is surprising how few people in the Western world have this money reserve.
To do: Use the ten percent payment to yourself in the beginning of the month to build up a reserve covering your costs of living for three month. Put the money on a separate saving account and don’t touch it unless you lose your main source of income (or the washing machine broke, but make sure to refill).
Rule #6. Never run into consumer depts.
What’s a consumer debt? Everything you buy with money you don’t have, that is losing its value over time. Yes, also a car. EVERYTHING. In other words: Never buy on credit. Never, nothing. The only reason to take out a loan are investments, with some exceptions, for example anything at the stock market. You can take out a loan for a house you want to live in or an apartment you want to rent out. But inform yourself on prices and market development and make a realistic calculation that fits your income and budget.
To do: As long as you have consumer debts, don’t buy anything, but pay off the debts as fast as you can. Buy new things, when you have the money.
Rule #7: Optimize your spending.
To me, saving money sounds like not doing or having something I would like to do or to have. I don’t like not’s. Knowing what makes you really happy when you spend money is much more fun than keeping things from yourself. So the question is not: Can money buy happiness? The question is: How can money buy me happiness. Science suggests that spending on experiences rather than on things and spending on others makes people happy. But science also suggests that this is only half the truth. We are individuals, and different things make us happy. I love interior design. Spending 180 USD on a vase can make me happy for years whenever I see my vase. Most people would be quite unhappy whenever they see the vase because in their eyes it is such a waste of money. Are the things you spend your money on worth the energy you need to earn that money? Find it out!
To do: Learn about your spending patterns - think of three things you regretted spending money on and of three things you spend money on that made you really happy.
Rule #8: Do nothing that you don’t understand. But do something. Understand what you are doing.
Do you really understand the money products you have? Your insurances, your pension funds? Actually, you don’t have to understand how exactly these products work. But you have to understand what’s in it for you. In it means numbers (see rule #3). Do you know the fees you are paying for these products, and the return on investment that remains? Have you ever calculated how inflation rates are eating your money that is not invested?
To do: Check all money products you have and decide if they are what you want and need in your personal life situation. If not, cancel them and get the right products.
Rule #9: Increase your income.
Get inventive to increase your income – it’s always possible! If you are employed, ask for a salary increase – but be very well prepared for the money talk (there are many books about it out there, or, even better, get a coach to prepare the talk). If salary increase is impossible, lookout for a new job that is better paid. If you have the perfect job and no increase possible, look for a side business, sell stuff on Ebay, give blood plasma etc. If you are self-employed, look how to add value to your service. If you are a business owner …
To do: Set a financial goal – a number – and write it down. Then start thinking how to reach it.
Rule #10: Invest money.
Women do not invest money mainly for three reasons: They think money is not important, they have the feeling, they don’t understand anything about it, or they are afraid to lose money. Reason number one: You are here, because somehow, money is important, right? Reason number two: Follow the ‘to do’ of Rule #1. Reason number three: If you don’t do anything, you definitely lose money, but without the option of increasing it. Start learning the basics of investing money. It’s not that complicated and there are tons of information out there. If you want to play it relatively safe and easy, start with ETF.
To do: Open up a depot and start your ETF saving plan.
Rule #11: Invest in yourself.
The greatest value is never money. It is always you, it’s your energy, your brain, your dreams and what you give to the world by making those dreams come true. So always invest in yourself.
To do: Spend 10% of your income on your personal development and book your next negotiation skills training, vocational training event, yoga retreat, mindfulness workshop, personal coach - you choose!
