Financial independence rarely comes from one big win. It comes from a handful of habits followed for years. These ten principles, based on material originally written by Dave Smith and used with his permission, sum up those habits.
Build the foundation: save and learn
- 1. Save consistently by living on less than you earn.
- 2. Study the investment methods and strategies of successful people, and seek advice only from those who are competent, through their own achievements, to give it.
- 3. Learn to apply the principles of compounding, discounting and leveraging.
Compounding, discounting and leverage are the core tools of note investing. Every principle that follows assumes you understand them.
Avoid the investments that sink people
- 4. Never bet on a loser because you think its luck is about to change.
- 5. Think twice before investing in anything that eats. Those deals are much easier to get into than out of.
- 6. Don’t invest in anything you can’t explain to your spouse. (John Schaub)
Stay patient and keep reinvesting
- 7. Reinvest all proceeds until financial independence is achieved.
- 8. Never get involved in anything that promises quick riches. Trying to get rich quick is another form of gambling.
As Proverbs 21:5 puts it:
“The plans of the diligent lead surely to advantage, but everyone who is hasty comes surely to poverty.”
If you try to get rich quickly, you’ll get poor even quicker.
Guard against greed
9. Be constantly on guard against every form of greed. No matter how much you have, wealth never brings lasting happiness. Wealth without God is death. Read Luke 12:15-21:
And (Jesus) said to them, “Take heed and beware of covetousness, for one’s life does not consist in the abundance of the things he possesses.”
Then He spoke a parable to them, saying: “The ground of a certain rich man yielded plentifully. And he thought within himself, saying, ‘What shall I do, since I have no room to store my crops?’ So he said, ‘I will do this: I will pull down my barns and build greater, and there I will store all my crops and my goods. And I will say to my soul, “Soul, you have many goods laid up for many years; take your ease; eat, drink, and be merry.”’
“But God said to him, ‘Fool! This night your soul will be required of you; then whose will those things be which you have provided?’ So is he who lays up treasure for himself, and is not rich toward God.”
Get started now
10. Get started! A good plan today is better than a perfect plan tomorrow.
Unless you were born wealthy, chances are you will have to sacrifice financially during part of your life. It is much better if that happens by choice when you are young than by force when you are too old to recover. The decision is yours.
