In financial life, more than making right decisions, one should focus on avoiding bad decisions. 

There are many people who have been careful and who have not messed up things. They have not lost money due to mistakes or foolish decisions. Such people live a happy and tension-free financial life, though they may not have accumulated a huge wealth. They have not taken awesome decisions, but they have not made terrible mistakes either.

Here are few ground rules which are like pillars for a quality financial life:

Ground rule of earning:

“Do not depend on a single source of income. Create a second/ third source of income”.

Many people just never focus on this aspect. An extra source of income may be a small income, provides a huge satisfaction and a cushion from shocks in life. Job or business may be the regular source of income for many. Every one is gifted with some or other skill in life, start sharing it with the world in your free time and create an alternate second source of income. Invest your savings thoughtfully and create a third source of passive income.

Ground rule of spending:

“If you buy things that you do not need, you may soon have to sell things you need”.

You earn so that you can spend it. Spending is a core activity in life. But there is a difference between spending and over-spending. Understand the difference today, to make your life more robust tomorrow.

Ground rule of saving:

“Do not invest what is left after spending, instead spend after what you save/invest”.

This is directly related to the ground rule on spending. Saving should take priority over spending. If you do not control your spending, you can never be able to save much and then you will never be able to give your best for wealth creation.

Ground rule of risk- taking:

“Never test the depth of the river with both your feet”.

There is a difference between risk and calculated risk. Calculated risk is the risk which we take after due thought process, and after careful evaluation of future consequences. Thoughtless risk- taking can lead us to disastrous consequences. If you invest a huge sum of money in stock trading, just because markets are going up and you do not want to miss the bus,  then you are taking reckless risk.

Ground rule of investing:

“Do not put all your eggs in one basket”.

If you put all your money in a single asset class or in one property or in a particular branch of a bank or in a single stock, things can go awfully wrong. When it goes wrong, you will cry and there will be no body to help you. The best practice is not to put all your wealth in one basket. Do remember that ‘portfolio diversification’ is a tool for minimizing risk, but not for maximizing returns.

Ground rule of expectations:

“Control your expectations and be in control of your happiness”.

Many of our great expectations boarder on greed. If you want to get in control of your happiness level, just control your expectations in life. In financial life, we expect financial products to give us amazing returns. Limit your expectations of returns on your investments and you will be happy.

Above ground rules should support each of our financial decisions as pillars. If you can master these ground rules in your financial life, your happiness and quality of life will enhance greatly. 

Sources: Internet