September 20, 2021 Darron Rowley

The Five Laws of Money

I believe there are 5 important laws of money that must be followed if you want to find true wealth.

I would like to share those with you today.

First: Income is the Driving Force

I have shared this many times before, but I believe this is the most neglected part of most individual’s personal finance.

Your income is the fuel that drives your finances.

Too often we neglect this important aspect.

If we are not adding accelerant to the financial fire we are building, it will slowly burn out – income is that accelerant.

It should be your goal to always be looking for ways to drive your income higher.

This will in turn fuel the rest of your finances.

Second: Pay Yourself First

This is very important to understand.

When many of us buy cars, homes, or get other debt; we ask ourselves: how much can I afford?

This is the wrong question.

The right question is: How can I limit these expenses so I can use my money to grow more money.

For this reason, every income earner should immediately set aside 10% of their income to savings.

This money will be used to grow more money – we will talk more about this in a bit.

We should consider that 10% as if it was almost a form of debt – a debt we owe to ourselves.

If that “debt” is paid first, it will make the next steps of building wealth feasible.

Third: Money Must be Told What to Do

Money won’t get to work on its own.

If we are not commanding it to do what we want it to, it will sit idle.

It will never make progress on its own.

Conversely, because of inflation, if left alone it will actually lose value.

Remember, you are in charge of what happens with your money.

We must decide how we are going to spend it.

Having this control will allow us to save and invest.

Once we have saved it, we have to be very strategic on how we utilize that money.

Fourth: The Power of Compounding

Once we have disciplined ourselves to save 10%, it’s time to grow that money.

Einstein once said: Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it.

You cannot build wealth without this principle.

So, what is compounding interest?

When we save 100 dollars, and invest it at 10% return, we will then have $110 (our original $100 and $10 of interest earned).

If invest again (compounded) at 10%, it then turns in to $121 ($110 and $11 of interest earned).

As you can see, the amount we are earning as interest is growing.

The first year it was $10, and the next it was $11.

As we continually invest the interest we earn, that interest earns us new interest.

We are compounding our money – very powerful!

The same can be said for starting a business.

If you save money, and use it to earn additional income, you are compounding that money.

Investment properties are another example.

If you buy a property and save the rental income for another property, you are compounding your money.

You are using that money to make you more.

Fifth: Cash Flow is King

For many of us, we have one source of income and that is our jobs.

The goal should be to have numerous sources of cash flow.

This is how business owners are able to grow such great wealth.

Over the past few years, I have focused intently on this one principle.

I have been fortunate throughout my career to have good paying jobs.

But the growth I have seen since I started a business trumps anything I did as an employee.

Now, not everyone is cut out for being a business owner, and I understand that.

You can also consider: investment properties, side hustles around your hobbies, investing in stocks.

You’ll find that as you add strong cash flows to your finances, you will make much quicker progress with your money.

Those cash flows can then be compounded to make you more income.

Conclusion

Be strategic!

Many people I work with are not seeing progress because they are simply doing nothing.

If you take that approach you shouldn’t be surprised when you see minimal or no growth.

Take control of your finances and implement these 5 Laws of Money.

I am confident you will see growth around your money that you have always dreamed of seeing.