Some (Very) Basic Money Principles Everyone Should Master

I’m no expert (God knows), but here’s a few things I’ve learned about money.

Pay yourself

A couple of years ago I read a book that changed the way I think about saving. It’s called The Richest Man in Babylon. One of its key insights is that you don’t have to be the highest earner to be the richest man or woman. Wealth is generated by the difference between what you spend and what you save. But here’s the important rule: you have to ‘pay yourself’. Whenever you get paid for something, put 10% of that money to work earning interest. 10% is a good level because you can apply it to any sum. Separate 10% of all your earnings and put it to work.

The Long Game

Saving is a marathon not a sprint. The trouble is we’re impatient. We love the thought that we can become a millionaire overnight and are always on the look out for a shortcut. Of course, some investments are better than others - interest rates vary. But I’ve learned that money multiplies quietly over time when you put it away and forget about it. You have to think long term. Rare opportunities do exist to make a quick profit, but use your common sense. High ROI’s come with risk. Factor in the worst-case scenario.


Saving is about sacrifice. We comfort ourselves on a daily basis with the small-scale things. The daily coffee, the bottle of wine after a long day or the treat meal out. All those things add up. However, it’s hard to sacrifice small things if you haven’t got a reason to save. What are you saving for? Once you know why you’re sacrificing the small things on a daily basis and start saving towards something, you’ve created purpose.

Put It To Work

Rich people are wealthy because they have worked out how to put money to work. This is key. Putting money away every month is one thing, but interest is another. Work out what financial products have the highest interest rates and lowest fees. The obvious thing about interest is that it has compound impact. The more you have the more you make. The rich get rewarded for their savings. Be diligent about finding the highest interest rates.

A Good Night’s Sleep

Financial security gives you peace of mind. (I could afford to quit work for a year if I wanted to — something inconceivable two years ago.) Worrying how we’re going to pay the rent causes stress and impacts our emotional, mental and physical wellbeing. Three years ago I didn’t know how I was going to pay the next month’s rent and knew something had to change. I was exhausted by the level of uncertainty in my life. I looked coldly at my financial situation and realised that I had to earn and save more, so I set about getting a job and cutting my living costs. I made a plan.

Pull Up Weeds

Ignorance about your financial situation is fatal. Not only will you overestimate how much you have, you’ll underestimate how much you spend. Untended plants in the garden attract the bugs and pests — so be a good gardner. Check up on your investments constantly and make sure your plants are in the right patch. A good example of unintended consequences is the changes banks make to fees and interest rates. You open an account because it has competitive terms and before you know it they’ve slashed interest rates or increased fees. Most of us are lazy so let these things happen without making the effort to switch accounts. Don’t sleepwalk into bad situations.

Looking back, I’m proud that I’ve managed to turn my financial situation around. Financial planning needn’t be rocket science. It involves some basic knowledge and a certain mindset. A small amount of knowledge pays dividends.