The 20 Laws of Money For Wealth Accumulation
People who become successful and wealthy in life have learned how to use money to their advantage. They do this by following certain laws that have been passed down throughout the ages. As a result, they are able to accumulate wealth and enjoy the financial freedom that those reserves provide them with.
Unsuccessful people, however, or those who tend to remain poor despite having many opportunities to change their life, do not follow the same laws that wealthy people do.
In fact, in the majority of cases, the exact opposite laws are followed producing the exact opposite results that rich people experience. So instead of building wealth, such individuals tend to decrease their wealth and become slaves to debts that they can never afford to repay.
What this all means is that, when it comes to money, you really have only two options: Either you follow the right laws and make money, or you follow the wrong laws and lose money. There is no middle ground.
In this article, we are going to be looking at the 20 laws of money as proposed by Brian Tracy. So let’s get started with the first law: the law of cause and effect.
(1) The Law of Cause & Effect
The law of cause and effect states that everything happens for a reason because there is a cause for every effect.
This is an extremely simple principle to understand, as it states that rich people are rich because they do things which make them rich, and poor people are poor because they do things which make them poor.
For example, a rich person may focus their efforts on accumulating assets, such as precious metals like gold and silver which increase in value over time.
Whilst poor people focus their efforts on accumulating liabilities, such as expensive electronic goods or flash cars that decrease in value over time.
This is the law of cause and effect. For everything that you do there is either a positive or negative outcome which comes as a direct result of the actions that you take.
Cause and effect in your life
The law of cause and effect not only applies to your personal finances, but also to every other aspect of your life. How successful you are, for example, largely depends on the actions that you have taken in the past.
If you spend the majority of your time trying to become better at what you do, then the law of cause and effect dictates that your skills or knowledge will improve in proportion to the amount of hours that you have invested into bettering yourself.
If, however, you spend the majority of your time watching TV and playing computer games, then the law of cause and effect dictates that the amount of failure you experience will be proportional to the amount of time that you spent having fun rather than working hard on things of long-term significance.
Once you start looking at things through the eyes of cause and effect, you will find that you start to see things a lot more clearly as your vision will no longer be clouded by delusions of chance, good luck or bad luck.
As a result, you will realize that you are where you are due to your actions in the past, and that where you will be in the future, will be determined by the actions that you take today.
Financial success is simply an effect that comes as a result of taking certain actions.
To become wealthy, you must therefore learn to identify the actions that will bring more money into your life, and then keep on repeating those actions until you achieve a level of wealth that satisfies you.
(2) The Law of Belief
The law of belief states that whatever you believe in with feeling ultimately becomes the reality in which you will live.
This law also states that you always act in a way that is consistent with your beliefs, especially, those which you have about yourself.
The beliefs you have about money act like filters in your brain. They allow you to see what you believe in, and hide from you the things which you do not believe in. This in turn influences the type of actions you take, and therefore, the amount of money that you are likely to make.
For example, suppose that a person believes they will always be poor and that there is nothing they can do to earn some extra cash for themselves.
Such a belief is likely to limit that person’s actions in a way that keeps them poor and blinds them to any financial opportunities that arise. As a result, they will probably struggle financially for the rest of their life locked in a mindset that keeps them poor.
But now suppose that person began to believe that one day they would be earning a high income. What do you think would happen? Since they are now no longer limited by their previous belief, they are likely to take actions which they never took before.
For example, rather than wasting their money on things they don’t really need, they choose to save or invest their money and learn how to use it more wisely.
Consequently, as a direct result of their belief, they vastly increase their chance of achieving their financial goals.
Do not underestimate the beliefs that you have about money and your current and future financial situation. Positive beliefs are needed to become wealthy, whilst negative self limiting beliefs will keep you poor.
(3) The Law of Expectations
The law of expectations is strongly influenced by the previous law, the law of belief, because it states that whatever you expect to happen in your life eventually becomes your own self fulfilling prophecy.
This means that you are always acting as your own fortune teller by the way that you think and talk about how things are going to turn out.
When you expect good things to happen to you, good things usually do happen. When you expect bad things to happen to you, bad things usually happen.
When it comes to money, wealthy people expect to live lives of financial abundance and have their net worth increase year after year. Whereas most people who are not wealthy, expect to struggle for their money and just earn enough to get by.
The beauty about this law is that your expectations are largely under your control. This means that you can decide whether you expect to be poor or whether you expect to be prosperous.
What can you imagine?
Your expectations about money are determined, and limited, by your imagination.
Some people have a very vivid imagination and can clearly envisage their future life. Whether that be earning a six figure salary, or simply amassing material wealth, they can picture what they want and are willing to work towards its achievement because one day they expect to get it.
Unsuccessful people, however, generally have a very limited imagination which causes them to focus their attention on the present moment and the satisfaction of their immediate needs.
As a result, their financial expectations also become limited, which ultimately becomes a self fulfilling prophecy that they live by.
If you want to bring financial abundance into your life you therefore need to think big and expect the best, because what you expect to happen will largely determine the type of things that you try to achieve.
Richard Branson, for example, a billionaire from the UK, has dreamed big his entire life. He dreamed of setting up a record label, owning retail stores throughout the world and owning an airline. His latest ambition is to make space tourism affordable for the general public.
With low expectations, Richard Branson would probably never even have thought of achieving any of these things.
This is why having high expectations are so important if you want to become well-off in life, because as long as you think that something is not possible for you, you will never try your hardest to achieve it. If you ever try at all.
The expectations you have determine what you think will happen to you in your life, which then determines the aims and objectives that you work to achieve.
The higher your expectations are, the greater a level of wealth that you are likely to pursue. But having high expectations is not enough, as those who only dream of riches without being willing to work hard, will remain just that, dreamers.
(4) The Law of Attraction
The law of attraction states that you attract into your life the people, circumstances and events that are aligned with your dominant thoughts.
In other words, the law of attraction states that the life you are living today is a reflection of the thoughts that you have had in the past. Therefore, according to this law, if you are able to change your thoughts you will be able to change your life.
Out of all the 20 laws of money, the law of attraction is perhaps the most famous and well known due to the movie “The Secret“.
Attraction in action
There is no doubt that the law of attraction is an important factor in determining whether you have a lot of money sitting in your bank account, or whether you become penniless instead.
Whether this is due to some mystical force, or due to a change in your thought patterns and the resulting actions you take, doesn’t really matter. The results are still the same.
If you think rich, then chances are that one day you will become rich, because you will start to attract the things into your life that will help you to make money rather than lose it.
This “attraction” could come in the form of information, such as through reading books on money, or it might come in the form of assistance, such as by meeting people who can help you to achieve your long term financial goals.
Through the thoughts that you have, and the resulting actions that you take, the law of attraction will eventually bring into your life whatever it is that you are most focused on.
If, however, you think poor, you will invariably become poor, because chances are that you will be attracting into your life the things that are going to take your money away from you.
This may come in the form of being careless with your money and wasting it, accumulating credit card debt or taking out high interest loans to purchase liabilities that quickly become worthless.
As long as you focus on being broke, then ultimately, that is what you will attract into your life.
Use the law of attraction to attract more money into your life by focusing your attention on things that bring you closer towards the achievement of your financial goals.
This doesn’t mean that you should ignore the bad things that happen to you, but rather, that your dominant thoughts should be on what you want to happen and not on what you don’t.
(5) The Law of Correspondence
The law of correspondence states that your outer world is a reflection of your inner world and corresponds with your dominant thoughts.
This law explains most of the reasons why people become successful or unsuccessful, are happy or unhappy, or are wealthy or poor. Their outer world reflects their most dominant inner thoughts.
Ultimately, what this means when it comes to your financial situation, is that nothing will change for you on the outside until it first changes for you on the inside. Inside your mind.
The same applies to any other area of your life. If you want to improve the results you are getting in the outside world, you first need to change the thoughts that you have in your internal world.
Your financial mental equivalent
A world on the outside that is a reflection of a person’s internal world is called a “mental equivalent”. This simply means that their external world is equivalent to their internal world.
Everyone should therefore aim to create a mental equivalent inside their mind of the things that they would like to experience in the outside world, because unless you create it in your mind first, it cannot be created outside of it.
This is done by exposing yourself to sources of information that will help you to achieve your financial goals, and avoiding negative sources of information that fill you with doom, gloom and self-doubt.
The law of correspondence can also be used as a useful aid to help you better understand other people.
For example, if someone is heavily in debt then this is likely to indicate that they are not very good at managing their money, and so they are also probably not very good at managing other areas of their life such as their health or their career.
As you move along on your journey towards financial independence it is worth keeping the law of correspondence in mind, as it will allow you to identify those individuals who may be able to help you to achieve your financial goals and those who could make it more difficult for you to do so.
Wealth creation begins in your mind, and the results are reflected in the reality that you see and experience. So be careful of the things that you expose yourself to as they will all influence your internal mental environment, some for the better and some for the worse.
(6) The Law of Abundance
The law of abundance states that we live in an abundant universe in which there is plenty of money available for anyone who wants it, that is of course, providing that you are willing to do what it takes to earn that money.
In today’s digital age the law of abundance has become more relevant than ever, as now, most of the money in the world exists only in the digital realm as numbers on a computer screen.
A good example of an excellent understanding of the law of abundance can be found with banking institutions.
When banks first started hundreds of years ago, they provided people with a safe place to keep their gold coins or gold bars in exchange for a fee.
A person would go to a bank, give that bank their gold or valuables, and in return receive a paper receipt. If they ever wanted to collect their gold, they would give the bank their receipt and receive their gold.
But the banks soon realized that only a few people would come to collect their gold at any one time. This meant that the rest of the gold they were looking after was sitting there doing nothing.
So the banks decided to use the gold that they were looking after to make themselves more money by investing it in other things or loaning it out to people at interest.
As long as all the bank’s customers didn’t come to the bank at once, the bank would always have enough gold to give back to its customers should they ask for it.
Today, we call this fractional reserve banking and in the digital age it is easier to do than ever before. Banks can now lend out virtually unlimited amounts of money, because unlike physical gold, money that exists on a computer screen is limitless.
As a result, lending institutions are able to make tremendous amounts of money, as essentially, they can lend out money to borrowers which they do not really have and that doesn’t really exist.
Since we entered the digital age there has been an endless supply of money being pumped around the world each and every day.
Money is not a scarce resource, what is scarce is having the correct knowledge and skills needed to acquire large sums of money. Therefore, the more you are able to develop your human capital, the more money you are likely to receive in return for your efforts.
(7) The Law of Exchange
The law of exchange states that money is a medium through which people exchange their labour in the production of goods and services for the goods and services of others.
In other words, this law states that people receive an income for doing or producing something that other people value and are willing to pay for.
Therefore, the higher the value of the service or product that you provide, the more money that you will receive in exchange for it.
Before there was money
Before money was invented people used to barter. This involved exchanging goods or services for other goods or services.
For example, if you came to my house to fix my leaking roof, then in exchange I would provide you with wood for your fireplace. This is called barter, and is what people used to do before there was money.
As societies grew larger however, it became far more convenient for goods and services to be exchanged into a medium like coins. Coins could be accumulated and stored, and then later exchanged for the goods and services that you required.
Today, we do exactly the same thing, only instead of using just coins, we now also use paper money and digital money in the form of credit cards or debit cards.
We work for a set amount of time and receive a set amount of money in return. We then use the money that we have earned to buy goods or services from other people who are also exchanging their goods or services into medium which they will then use to buy goods and services from others.
In economics, the flow of goods and services in an economy is referred to as “real flows” and is said to exist in a “circular flow” because the income of one individual equates to an expense of another.
Value is proportional to reward
The law of exchange dictates that the amount of money you receive for a product or service depends on how valuable it is.
The more something is needed, the fewer people who have it and the more important it is, the higher its value will be and the more money that you will get for it. This is the basic principle behind the law of supply and demand.
Value is largely determined by what someone is willing to pay for something, and can therefore vary depending on that person’s feelings, attitudes and opinions of what you have to offer.
For some people, they may consider your product or service to be extremely valuable and so will be willing to pay a lot for it. Whilst others may consider it of no value, and so will pay you very little or nothing at all.
Generally speaking, there are three factors which determine value in the real world: the type of work you do, how well you do it and the difficulty in finding what you do elsewhere.
If you undergo formal education to train yourself in a highly specialized field for example, you are likely to receive a high wage for it because not many other people can do what you do.
If, on the other hand, you work in a low skilled profession in which anyone can do what you do, then you are likely to receive a lower wage because competition from other workers drives down the value of your particular skill.
In order to make more money you must increase the value of what you do. This may mean increasing your knowledge, skills or changing your job.
Whatever you can do to add more value to others will increase the amount of money that you are able to earn in exchange for your time.
The highest paid people in society continually improve what they do so that they can earn more money by offering products and services of increasingly greater value.
(8) The Law of Capital
The law of capital states that your most valuable asset in terms of cash flow, is your physical and mental capital. Your earning ability.
If you are able to apply your earning ability to the production of valuable goods and services, you will have enough money to do all the things you want in life.
The amount of money you earn today is therefore a direct measure of the extent to which you have developed your earning ability. The higher your earning ability is, the more money you are likely to be making.
Time is your most precious resource
How much time you put into something largely determines your earning ability. If you have poor time management skills, for example, and so end up wasting your time on unproductive tasks, your time won’t be worth very much at all.
So at the end of the day your time is really all that you have to sell, and this is why you should make the most of it by avoiding squandering it on things that add no long term value to your life.
Importantly, value and time are closely interrelated, as in general, it can be stated that as time increases so does value.
Wine and cheese are both good examples of this principle, as the value of these two commodities increases with age. Although, it should be noted, that in some cases, such as the delivery of goods, less time can equal higher value.
If you want to make money and become wealthy, you must therefore be prepared to spend however long it takes to create something of high enough value that people want to buy.
You can, of course, spend less time by creating things of lower value. But it should be remembered that as value decreases so does consumer demand and the price that you are able to charge for your good or service.
Time & money can be spent or invested
Once time or money have been spent they are gone forever and you cannot get them back. You can, however, invest your time or money so that you receive more time or more money later on.
If time or money is invested in learning new skills or knowledge, for example, you will increase your personal value, which will then increase your future earning ability and your cash flow.
This is why you should always invest a portion of your income each month into personal development, so that you can work on becoming better at the things which are most important to you.
One of your major purposes in life should be to increase your earning potential to receive the most amount of money possible in exchange for your time.
An effective way to do this is to identify the highest value uses of your time, and then focus more of your time on doing those things.
The more personal value that you are able to create for yourself the greater the value of the goods or services that you produce will be, and the greater the monetary value that you will receive in return.
(9) The Law of Conservation
The law of conservation states that it’s not how much money you make which determines your financial future, but rather, how much of your money you are able to keep.
There are many people, for example, who make a lot of money over the course of their working life but because they do not manage their money well and spend it needlessly, they retire broke and poor.
On the other hand, there are people who do not make much money, but because they use their money wisely and save it, they are able to retire extremely wealthy and spend the rest of their days in comfort.
So if you want to achieve financial success in life, your aim must be to save more money than you spend, as otherwise, you will never be able to accumulate and grow wealth.
The difference between the rich & the poor
Financially successful people are experts at cutting costs and saving their money for the future. When they do spend money, they do so predominantly on assets (i.e., things that increase in value over time) rather than on liabilities (i.e., things that decrease in value over time).
This ensures that should the economy take a turn for the worse and/or they are made redundant and lose their job/business, they will always have something to fall back on.
Funds which are set aside specifically for this purpose is known as an emergency fund, and usually entails savings of at least 6 months salary to provide enough money to continue your current standard of living whilst you look for employment.
People who are not financially successful, tend to do the exact opposite to those who are rich. They are experts at spending their money and ensuring that they have nothing left for the future. They live for today with little or no regard for their long term financial future.
When the economy turns bad or they lose their job, they find that they have nothing to fall back on except charity handouts or the streets.
Wealth building occurs by accumulating as many assets as you can and reducing the number of financial obligations, or liabilities, that you have.
Anyone can become wealthy, even those on a low salary, providing that they are able to save more money than they spend. But if you spend more than you save, even a high salary won’t be enough to make you rich.
(10) Parkinson’s Law
Out of all the 20 laws of money, Parkinson’s law is one of the most important to understand in terms of your long term financial future.
This law simply states that as your income increases so do your expenses, and helps to explain why so many people retire poor despite earning a good salary throughout the course of their working life.
You can probably find evidence of Parkinson’s law in your own life, as today you are most likely earning many times more than what you were at your first job.
Yet, despite this pay increase, there always seems to be a need to spend every penny that you have in order to support your current lifestyle.
No matter how much money you make it never seems to be enough, and you always find yourself in more or less the same financial situation as you were before.
Breaking Parkinson’s law
In order to become financially independent you must make a conscious effort to break Parkinson’s law.
This is done by developing enough willpower to resist the urge to spend everything you earn and developing the discipline to save that money instead.
As long as you obey Parkinson’s law, you will never become financially successful in life.
One of the best ways to break Parkinson’s law is to increase your expenses at a slower rate than your income increases, and then to save or invest the difference.
If you are able to separate your income and expenses in this way, you will be able to increase your standard of living whilst ensuring that your future remains a financially secure one.
So from this point forward be aware of Parkinson’s law and make an effort to save a portion of any salary increase you receive, rather than falling into the habit of spending more just because you are making more.
When people earn more money they tend to spend more money, which subsequently keeps them in roughly the same financial situation throughout their life.
In order to become rich, you must therefore develop the ability to accumulate wealth by ensuring that your expenses increase at a slower rate than your income increases.
(11) The Law of Time Perspective
The law of time perspective states that the people who become most successful in life are those who look at things from a long term rather than short term time perspective.
You can see evidence of this law all around you, as the people at the bottom end of society tend to be focused only on short term immediate gratification.
As a result, they spend the majority of their time and money relaxing, having fun and thinking only about how they are feeling in the present moment.
The people at the top end of society, however, such as teachers, managers, business executives, CEOs, politicians and presidents, think about things very differently to those at the bottom end.
They consider how their actions will affect the type of results they get in the future, and so they make sure that their day to day activities will give them the most return on their time investment.
In other words, rather than focusing on the satisfaction of their short term needs and desires, successful people tend to think long term and are able to resist the temptation to give in to immediate gratification.
The importance of thinking ahead
When a person begins to think about things using a long term time perspective, they generally do so because they have decided upon what they want to achieve and are willing to do whatever it takes to get it.
They think about the consequences of their financial choices, and then decide whether or not following a particular course of action will help them to reach their goal.
As a result, most people who become financially successful in life have done so by being very careful with their money and only spending it when absolutely necessary.
If we contrast this to the lower end members of society, it becomes very clear why so many people struggle financially and get themselves into debt.
These types of people tend only to think about the present moment, and so they engage in financial behaviors that are virtually guaranteed to ensure they spend the rest of their life poor and in debt.
For example, rather than saving their money or investing it so that they can have financial security later in life, they spend all the money they earn on products they see advertised on TV and in magazines.
As a result of these wild spending sprees, it’s not uncommon to see such people living paycheck to paycheck and running up massive credit card debts.
All this because they could not discipline themselves to think about things from a long term perspective.
When it comes time to retire, these heavy spenders must then rely on a government pension just in order to survive as they have little or no savings of their own to support themselves with.
If there was no government pension, a lot of these people would be forced to live in the streets homeless.
Thinking about things with a long term time perspective is not always easy, as it’s very tempting to live for today and have fun now. Unfortunately, however, as you have already seen, this comes at a very grave price.
In order to make yourself think about things from a long term perspective, you need to develop the ability to make yourself do what you know you should do whether you feel like it or not.
This is called self discipline, and the degree to which you are able to discipline yourself throughout your life will largely determine the amount of financial success that you achieve.
(12) The Law of Saving
If you wish to become financially successful in life, then you absolutely must develop the habit of saving your money on a regular basis.
The more money that you are able to save today, the more financially secure your future will be. As a result, the less you will have to worry about having enough money to survive on, or having enough money to buy the things that you want and need in life.
This is the law of saving, and in essence, it states that you should aim to save more of your money than you spend.
This is also the most important law out of all the 20 laws of money, because if you do not follow this law, then it is very unlikely that you will ever become wealthy.
Pay yourself first
One of the easiest ways to begin saving your money is to pay yourself first. This simply involves taking a portion of your income each month and putting it into a savings account before you do anything else with your money.
One common mistake that people make when it comes to saving their money, is to try and save what they have left over from their paycheck at the end of the month. But more often than not, there is no money left and so they end up not saving anything at all.
By paying yourself first, you will find that your spending habits will quickly adjust to accommodate the amount of money you have left over.
So if you follow this simple principle, you will always be able to save money, pay your bills and buy yourself things.
How much money should you save each month? A good figure to aim for is around 10% of your income, and if possible, 20%. But if you can’t save that much, then save at least 1% of your income each month and gradually increase the amount as you can.
The important thing is to get into the habit of saving your money on a regular basis, because once you are able to do this, you will find it a lot easier to save your money and to save more of it over the course of your working life.
Note: To find out more about paying yourself first, you may want to read the book “The Automatic Millionaire” by David Bach.
To get rich you need to build wealth, and the only way that you can do this is by saving more money than you spend. If you spend more than you save you will go broke and you won’t become rich.
(13) The Law of Three
Financial independence comes from engaging in activities that will create long term financial stability and security. Without either of these, you put yourself at risk of losing all that you have worked so hard for.
To achieve stability and security, you must make an effort to maintain the correct proportions of your finances in three critical areas: savings, insurance and investments. This is the law of three.
1) Save Your Money
The goal of saving your money is to protect yourself against sudden or unexpected losses of income.
You should therefore resolve to have at least six months worth of income saved in an emergency fund, which you only draw upon when your regular source of income has been cut off.
Having an emergency fund will allow you to maintain your current standard of living, whilst at the same allowing you to find another source of income.
Knowing that you have money saved in reserve will also give you tremendous peace of mind, especially if you have a family to look after.
So if you don’t have an emergency fund, make it a top priority to create a separate high yielding savings account and start putting some money away each month to ensure that your future remains a financially secure one.
2) Insure the Important Things
The purpose of insurance is to protect against losses which you could not afford to cover by yourself. It is therefore absolutely essential that you insure the important and valuable things in your life.
Some types of insurance that everyone should have include:
• Home insurance
• Life insurance
• Disability insurance
• Health insurance
• Car insurance
All of these types of insurance are absolutely critical in protecting your current and future financial security, because they represent big potential losses that you would find difficult to recover from by yourself.
Of course, you don’t have to insure these things and your gamble might pay off, but if it doesn’t, you could land yourself in a very serious financial situation that you may never be able to completely recover from.
3) Invest Your Money
One way to ensure your financial security and financial freedom, is to keep on working for money until your investments pay you more than what your job pays you.
After you have reached this threshold, you can then retire as you will have enough money to live out the rest of your life without ever having to work again.
Money & the Stages of Your Life
Your life can be divided into three parts, and although each of these occurs sequentially, they can and do overlap.
Having an understanding of these stages of life can assist in financial planning by giving you a realistic expectation of your likely financial situation during certain periods of your life.
The first years of your life are your learning years. These are the years when you go to school to get an education so that you can later get yourself a high paying job.
However, anyone who is serious about becoming financially successful should note that learning does not end at school, but rather, it is a continuous process that extends throughout your whole life.
After your learning years come your earning years. After you have received an education that has allowed you to get a certain job, you then begin to exchange your time and services for money.
The more valuable your time or service is, the more money that you will receive in exchange for them. Your earning years last roughly from ages 20-65, depending on your level of education and the type of career that you pursue.
The last stage of your life is your retirement years. At this point, your aim is to have enough money so that you can spend the rest of your days enjoying yourself without having to work to survive.
With an average life expectancy approaching 80 years, one of the best things that you can do throughout your earning years is to continually save your money so that you have enough left over for your retirement years.
Be aware of the stages of life because failure to do so may result in you retiring with little or no money to support yourself with, something which has already happened to many elderly people who are now suffering as a result.
To ensure that you are able to retire in comfort, take steps to save and invest your money whenever you have the opportunity to do so, and to protect yourself against financial risks, insure items of high value.
(14) The Law of Investing
The law of investing states that you should spend as much time studying a particular investment option as you do earning the money that you will put into that investment.
Any investment option you look into should therefore be done with extreme care, and never rushed into.
At a minimum, you should have full and complete disclosure of every detail, and if you have any doubts at all, you would probably be better off choosing a safer option such as keeping your money in a bank.
Don’t Lose Money
One of the simplest principles that will virtually ensure your long term financial security is to never lose money.
The money that you currently have is a result of all the hours, weeks and years of your life that you have put into earning that amount.
Your money is therefore a part of your life and should be held onto tightly, because once it’s gone, it’s gone for good.
When it comes to investments, you should therefore avoid any investment where there is a possibility that you will lose your money unless you can afford to survive that loss.
Some people, however, have an attitude that they can afford to lose a little bit of money, because after all, it’s only a small amount and they have plenty more.
There is an old saying which reflects the wisdom of this mentality that you would do well to remember.
“A fool and his money are soon parted.”
And also another.
“When a man with experience meets a man with money, the man with the money is going to end up with the experience and the man with the experience is going to end up with the money.”
Always resolve to hold on tightly to the money that you have, no matter how small or large the amount. Once you develop a mentality of losing money, eventually, that is all you will do.
Only invest with recognized experts
Any investment you undertake should be undertaken with careful research and with a recognized investment expert who has a proven track record of success.
Never invest with people or firms you know nothing about, and always invest in something you have an interest in or have a good understanding of. This is exactly what Warren Buffett does, and he is one of the most successful investors in the world.
When taking specific investment advice, do so only from people who are already financially successful and not those who are trying to become successful through you.
Note: Robert Kiyosaki, author of “Rich Dad, Poor Dad” does not believe in the traditional investment advice of diversifying your portfolio. He argues that doing so results in a zero sum gain because your gains will be offset by your losses.
Instead, he agrees with the Warren Buffett way. Know what you are investing in extremely well, and only invest in those things.
Investing your money holds the potential of bringing you great returns on your original investment, and is therefore something that you will have to do at some point in your life if you wish to build your level of wealth.
However, rushing into investments and making poor investment decisions can be an easy and quick way to lose your money and leave you broke.
When the dot com bubble burst, for example, many investors lost lots of money because they rushed into something they did not fully understand thinking that it was a quick and easy way to get rich.
(15) The Law of Compound Interest
Compound interest is a type of interest that builds interest upon interest already earned.
If you leave your money collecting compound interest for long enough, such as over the course of your working life, even a small amount of money can turn into a significant amount.
Compound interest can be calculated at different rates. The best type is where it is calculated on a daily basis, and this is usually found with savings accounts.
Less preferable, is interest calculated on a monthly or yearly basis, as over the course of time you will get a lower rate of return on your money.
The rule of 72
The rule of 72 is a simple rule that you can use to determine how long it will take for your money to double at a given rate of interest.
To work this out, you just divide the interest rate you are getting into the number 72. For example, if you are getting 5% interest on your investment, then 72/5=14.
This means that your money will double in 14 years at that rate of interest. Give it another 14 years, and your money would have doubled again.
Depending on how long you keep your investment going, and providing you started saving early enough, you will have a lot of money left over for you when you retire. That’s the magic of compounding interest.
Don’t touch the money you save
There is one golden rule that you absolutely must follow when it comes to compound interest, don’t touch the money you save!
If you do, you will lose the power of compound interest, and even though you may use only a little bit of your savings, you could be giving up what equates to a very large amount later on.
So the key to compound interest is to start early, invest your money on a regular basis and never take anything out of your savings. If you follow these rules, you will be rich when you retire.
For example, let’s suppose that a person saves $100 each month at a compounding interest rate of 10%. They start saving when they are 21 and finish saving at age 65 when they retire. By the time they reach 65 they would be a millionaire.
To ensure your financial security, make it your goal right now to open up a savings account and then resolve to save a certain portion of your income each month for the next five, ten or even twenty years. One day in the future you will be very glad you did!
(16) The Law of Accumulation
The law of accumulation states that financial security and success come from making lots of small efforts and sacrifices, most of which, no one will ever see or appreciate.
In order to begin the process of accumulation, you must be able to discipline yourself to do what you know you should do whether you feel like it or not, and then to persist through the difficult times when the going gets tough.
It is no use doing this only for a short time, as the law dictates that financial success can only be obtained through constant action over a prolonged period of time.
If you are able to keep this up, your debts will slowly start to disappear, your financial situation will start to improve, your savings will grow and your overall quality of life will improve as a direct result of your efforts.
One of the hardest aspects of the law of financial accumulation is getting started. Very often people feel that they do not have enough money right now to start saving, but promise themselves that someday in the future they will.
Unfortunately, however, such a day usually never comes, and so they end up not saving anything throughout their working life causing them to retire poor and broke.
It is therefore absolutely essential that you do something as soon as possible to start saving your money, even if that involves just looking at the different types of bank accounts available to you.
The sooner you take that first step, the more momentum you will build and the more likely you will be to take action that will benefit your finances.
If, however, you put it off to sometime in the future you won’t build any momentum, and so will be unlikely to ever take any action.
This is known as the “momentum principle” and applies to virtually every aspect of life. It simply states that at the start it is always the hardest to get going, but once you take that first step, it becomes easier and easier from then on.
One step at a time
If you have never saved your money before and then you start thinking about saving 10% or 20% of your income, you will probably be put off by the prospect of saving so much and so will immediately come up with numerous reasons as to why you can’t start saving today.
But what if you were to save 1% of your income? How would you feel about that?
If you are honest with yourself you should definitely be able to save 1% of your income, and even though this isn’t very much, it’s all you need to build momentum to get into the habit of saving your money on a regular basis.
As you become more comfortable with saving your money, increase that amount to 2%, 5%, 10% and then 20% if you can.
Over the course of a year you will be surprised at how much you have saved, and if you continue this throughout your life, your future financial security is virtually guaranteed.
Unless you win the lottery, no one ever becomes rich over night. In order to become rich, you therefore need to take a series of small steps that move you in the direction of your long term financial goals.
The first step is often the hardest, but once you make it, you should find each subsequent step a lot easier. Even if that first step is a small one, it is still a step in the right direction, and at the end of the day, that is all that matters.
(17) The Law of Magnetism
The law of magnetism is similar in principle to the law of attraction. It states that the more money you save, the more money you will attract into your life.
This law helps to explain many of the reasons why certain people have been wealthy throughout history, and why others have remained poor.
Those who saved their money attracted more of it and prospered, whilst those who squandered their money attracted less of it and so lived poorly.
According to this law, money flows to where it is loved and respected. Therefore, the more positive emotions you can associate with your money, the more opportunities you will have to attract it into your life.
Developing the money mindset
In order to attract more money into your life you need some money to begin with, because it takes money to make money.
So if you don’t have anything saved up at the moment, you won’t be attracting more money into your life because you haven’t got anything to start with.
So take some time to look at your current financial situation and try to determine where you can cut back on your expenses. Then resolve to save a small portion of your income in an instant access or regular savings account.
The simple fact that you have begun to save your money, will, by the law of magnetism, attract more money to those savings. Over time they will continue to grow which will eventually enable you to reach your financial goals.
Be careful with the law of magnetism though, because just as it can work for you, so can it work against you. If you tend to waste your money on purchasing liabilities, for example, you will tend to attract more of those things into your life.
This is especially true when it comes to personal debt, such as credit card debt. People who get themselves into debt very often end up attracting more debts into their life.
Eventually, they can reach a point where they become unable to repay the money that they have borrowed, and all they are able to repay are the monthly interest charges.
When this happens to a person with credit card debt, they are said to have fallen into the credit card debt trap.
Unfortunately, this trap can be very difficult to escape and many people never do. They become slaves to their debt and spend the rest of their lives in poverty as they struggle to pay it back.
Money is like a magnet. The more of it you have the more of it you seem to attract into your life and the stronger that attraction becomes.
Use the law of magnetism to your advantage by slowing building up your wealth each year so that you can bring increasingly greater amounts of money into your life as you get older.
(18) The Law of Accelerating Acceleration
The law of accelerating acceleration states that the more money you have, and the more successful you are, the faster money and success come into your life from a variety of different sources.
This law explains why successful and rich people always seem to have lots of success and wealth, and why it seems to come so easily to them.
If you have achieved lots of success in your life, everyone wants to know you and be your friend. This increases the amount of contacts you make, which subsequently increases the amount of opportunities you are exposed to.
Money seems to increase much more rapidly for those who have lots of it because they can do more things with it. They are able to make larger investments, earn more in interest on their savings and hire better people to help them expand their business.
The law also explains why success and wealth are difficult to obtain when you are first starting out, because when you have less success and wealth, you will naturally attract less of these things into your life.
If you are not very successful, most people aren’t really that bothered or interested in who you are. To them, you are just another average person like everyone else, and so your contacts and opportunities will be limited.
If you don’t have much money, then you will be able to do far less with your money than a wealthy person could.
You won’t be able to make as large of an investment, will find it more difficult for people to lend you money and won’t be able to hire as smart or talented people to help you achieve your aims and objectives.
The 80/20 principle
Part of the law of accelerating acceleration states that 80% of your success will come from the last 20% of the time you put into something.
This is quite amazing if you think about it, because it means that you will achieve only about 20% of the total success possible for you in the first 80% of the time or money that you invest into something.
What this means is that if you expect to get rich quickly, you are unlikely to stick with something for long enough to gain real success from it because you will be discouraged by what seems like so little success for so much effort.
This is why people who start out with expectations of achieving quick and easy wealth very rarely ever get rich, because once they feel that they are not getting results fast enough, or not getting the results they wanted, they soon give up and look for another get rich quick scheme that will provide them with a shortcut to wealth.
Those who realize that success takes time to achieve however, will be much more likely to persist through the slow and difficult times until they finally reach their goal.
This is why most millionaires do not become millionaires overnight, but rather, were able to achieve their wealth as a result of many years of consistent and focused effort.
Real wealth building is often a long and slow process, especially when you are first starting out. But if you stick with something for the long term, you will eventually begin to experience wealth and success appearing in your life at an ever increasing rate.
(19) The Law of the Stock Market
When you own a share of stock, that stock represents your share of ownership of a particular company. This subsequently entitles you to a share of the benefits and risks associated with that company.
This can include things such as their profits, losses, stock increases, declines in value and increasing or decreasing demands for their goods or services.
Therefore, when you buy a stock in a company, you are essentially betting a certain amount of your money on the success or failure of that company.
If the company does well, you will experience the benefits of a higher stock value, which you could then sell for more money than it originally cost you to buy.
If, however, that company does poorly and the value of your stock declines, you may end up losing money and getting a negative rate of return on your initial investment.
What determines the success or failure of a company is what gives the stock market its ups and downs.
Some of these factors include: the amount of sales during different times of the year, competition between existing companies and emerging new companies, changes in technology, interest rates, quality of management and events around the word.
All of these factors can affect how well a particular company is doing, which, overall, will affect the stock market as a whole.
Bulls make money
You may sometimes hear people referring to the stock market as looking bullish or bearish, and unless you are familiar with stock market lingo, you probably wouldn’t have a clue what that meant.
A bullish stock market refers to a rising market. This means that people are expecting the value of the stock market as a whole to increase.
A bearish stock market however, refers to the exact opposite. When the market is bearish the stock market is predicted as a whole to decrease in value.
The law of the stock market states that the people who invest their money when the stock market it bullish (rising) make money. Those who sell their stocks when the stock market is bearish (declining) to protect themselves, also make money.
But greedy people who try to exploit the market, invariably end up losing money such as day traders who try to make a large profit in a single day.
In it for the long term
The stock market as a whole has increased in value over the past 90 years by an average of 11%, although, it could be argued that this a false increase as currency values have decreased from what they once were.
The stock market is therefore something that should be viewed as a long term investment, rather than a get rich quick scheme.
It will naturally have its ups and downs throughout the course of its life, but if you stick with it to the end, you should experience an overall positive rate of return on your original investment.
Those who try to get into the stock market to make a quick buck, or sell or their stocks because things have taken a dip, are the people who more often than not will experience a negative rate of return on their investment.
There’s no such thing as market timing
If you could predict when certain stocks are going to rise and fall you would become a very wealthy person.
Unfortunately, however, it’s virtually impossible to always buy stocks when prices are low and then sell them when prices are high.
It is therefore better to use a long term investment strategy. This involves buying the stocks of solid companies which sell respected products and services, and then holding onto those stocks for the long term.
The stock market is managed & made by professionals
When a stock is sold the person selling that stock is predicting that its value will decline, and the person buying that stock is predicting that its value will increase.
Every stock purchase is therefore a zero sum game. This means that one person will benefit from the sale, whilst the other will lose out from the sale.
The person with the best knowledge and most experience will usually be the winner. People who play the stock market for a living do this for 40-60 hours a week.
Your safest course of investing in the stock market comes not from betting against these people, but rather from looking at the market as a whole and basing your decisions on averages.
One way to do this is to invest in an index fund which represents all the stocks in that index which go up and down based on the average trend of the entire market.
Index funds have consistently outperformed professionally managed mutual funds over the years, and so represent a relatively safe investment option for novice investors.
Investing in the stock market can be an effective way to increase your overall level of wealth. However, it is not something that will make you rich overnight and so should be seen as something that you invest in for the long term.
(20) The Law of Real Estate
The law of real estate states that the value of a property is determined by the income that can be generated by it when that property it is developed to its highest and best use.
Real estate value
Although a property may have some sentimental value to its owner, the only thing that really matters to potential buyers is its future earning power and the land that it is on.
An example of land that has no future earning power could include desert land, as this cannot be developed to produce income, provide accommodation or meet any useful human need.
The future earning power of land can also decline over time. For example, there are many areas in large cities, such as Detroit, Michigan, which were once considered to be of high value, but because growth and development slowed down, or went away, the value of that land subsequently decreased from what it once was.
A homeowner who sells their home in such an area may find that they have to sell it for less than it cost to buy.
Conversely, the value of a property may increase in value should a particular area of land experience growth and development. In this case, the homeowner can expect to sell their property for more than they originally paid for it.
You make your money when you buy
Most people think that they will make a profit on the day that they decide to sell their house, however, in reality, the reverse is true.
You make your profit when you buy a property at the right price and under the right terms, which then later allows you to sell your property for more money than it cost you to buy.
It is important to remember this because the better you research a property and its surrounding area, the better of a deal you are likely to get should you decide to sell later on.
There is a simple rule when it comes to selecting a property, the local economic activity of the surrounding area will largely determine the value of what you buy.
If you purchase a property in a declining community that is losing jobs and experiencing a negative growth rate, for example, you can expect your property to decline in value over time.
If, however, you purchase in a growing community with an increasing number of local jobs, then you can expect the value of your property to increase in value over time.
A good example of this can be seen around Silicon Valley, where the rapid influx of high tech jobs has caused an explosion in house prices.
The most important factors which affect the value of real estate are therefore the level of new business formation and the economic growth rate of the surrounding area.
The key to successful real estate investing is to predict in which areas this growth will occur before it does, and then to buy the best property which will then later increase in value.
To make money buying houses, pay close attention to the current and future economic prospects of an area. If an area holds the potential for growth, then so will your investment.
Below you will find a quick review to help you remember each of the 20 laws of money:
1) The law of cause and effect
Everything happens for a reason because there is a cause for every effect.
2) The law of belief
Whatever it is that you truly believe in with feeling becomes your reality.
3) The law of expectations
Whatever you expect to happen becomes your own self fulfilling prophecy.
4) The law of attraction
You attract into your life the things you think about most of the time.
5) The law of correspondence
Your outer world is a reflection of your inner world. To change your outer world you need to change your inner world.
6) The law of abundance
There is more than enough money available for the people who want it and are willing to work for it.
7) The law of exchange
Money is a medium through which people exchange their labor in the production of goods and services for the goods and services of others.
8) The law of capital
In terms of cash flow your most value asset is your earning potential. The more you develop your ability to earn money the wealthier you will become.
9) The law of time perspective
The further you can think ahead about the consequences of your actions the more successful you will be in life.
10) The law of saving
Financial freedom comes to those who save at least 10% of their income on a regular basis throughout their life.
11) The law of conservation
It is not how much money you make but how much you keep that will determine your current and future financial situation.
12) Parkinson’s law
The more money you earn the more you spend. Financial freedom comes from violating this law.
13) The law of three
Financial freedom is built upon a foundation of savings, insurance and investments.
14) The law of investing
Take the time to look into the things you invest in and make sure you have a good understanding of them. Never rush into an investment.
15) The law of compound interest
Use compound interest to make more money throughout the course of your working life and then retire wealthy.
16) The law of accumulation
Financial success comes as a result of lots of small efforts done on a constant basis, most of which nobody will notice.
17) The law of magnetism
The more money you have and the more successful you are, the faster you will attract money and success into your life from a variety of sources.
18) The law of accelerating acceleration
The faster you move towards financial freedom the faster it moves towards you.
19) The law of the stock market
The stock market is a long term investment.
20) The law of real estate
The value of a piece of real estate is determined by its future earning power.