Five money rules that will increase your net worth

Five money rules that will increase your net worthFive money rules that will increase your net worthWhats your personal finance strategy? If you asked me a few years ago, I would probably laugh it off Ill leave that for tomorrow.Dumb move. If you dont have a personal finance strategy, theres a chance you will never get wealthy. The average millennialearns$40-$50K a year and has $20-$40K in student debt.But the high achieving millennial earns up to 7X mora than the average. The same is true for people of all ages. The difference between average earners and above-earners is huge.Once I realized that, I got serious about money. But I didnt focus on making mora money- a mistake that many of us make. We always think more cash is the solution to everything.All my problems will be solved once I have a little bit more cash on hand. Sorry to disappoint you, but that will never happen. As your bank account grows, your problems will too.Yes, earning more is important. Not only for your bank acc ount but for your career development. As you get better and have more experience you can earn more.But we must stop thinking that the solution to all our problems is more money. Were better off by creating a strategy that helps us to manage money better- that alone will help us break away from the average earners. To do that, Ive created 7 money rules for myself.1. Desire lessHeres some common sense It takes more time to make money than to spend it. You work thousands of hours to make a certain amount of money. And then, you can drop it all on a new car, luxury vacation, watch, or anything else that you desire.We all know that, right? And yet, we keep on spending money like its nothing. I know this is something your granddad probably said, but the easiest way to grow your bank account is NOT to spend it all.Its solid advice. The ancient Stoics knew about this too.True freedom means you desire less.2. Know how the economy worksWhen does the interest rate generally go up? When does it go down? What are bonds? Whats inflation? When do you get inflation? Whats a market cycle?Why do economies generally collapse? Whats debt? Who prints money? Why do they print money?I can go on forever, but you get the point. Look, you dont have to be an economist (I aya aint one). But do yourself a favor, read a book likeA Random Walk Down Wallstreetby Burton Malkiel. Its an excellent summary of how the economy and investing work. Or, spend some time onInvestopedia.comand figure out the answers to all the above questions- and more.The point is that basic knowledge about how all this stuff works prevents panic. Oh sh-t The market is down What now Panicking will not help you.3. Avoid personal debtPersonal debt destroys your net worth like nothing else. To be clear, I dont think theres anything wrong with borrowing money.If you want to start a business or do big real estate deals, its often necessary and smart to take on debt. But we must be wise about taking on debt. Like investing, there are rules to it.One thing is sure Never borrow money to buy a car, electronics, or anything else that goes down in value.But when it comes to more complex things like growing/starting a business, investing in real estate, or even your education, think carefully before you go into debt. Remember that borrowing money is not free.4. Save as much as you canThis is obvious by now. Desire less, avoid debt, and save as much as you can. Personal finance is called personal finance for a reason.Your money strategy depends on your age, personality, place you live, education, experience, etc. A person who lives in Manhattan probably cant buy an apartment. Its overpriced, and renting is probably smarter.Buying an apartment makes more sense in a city with lower real estate prices. In that case, renting is more expensive. No matter what you do, always make sure you have enough cash so you can make an investment if you spot an opportunity.How much in savings is enough? Thats up to you. What f igure makes you feel comfortable?5. Have a short-term strategyThis article is for people who do NOT want to become professional investors or traders. We invest for the long-term- not to make money today or even in a year.My investment strategy is focused on the long-term. But that means I also need to generate income today so I can pay the bills. How do you do that? Thats your short-term strategy.My personal short-term money strategy is based onimproving my skillsand creating multiple income streams. I invest a lot in my personal education because I realize more skills mean more earning power.Also, I dont rely on one big paycheck. Instead, I have multiple ways I generate value. That means less risk. If one income stream disappears, youll still have others.Start nowYou see, these rules are not all about making more money.Yes, its important to have multiple income streams.But before you focus on generating more money, get better at dealing with the cash you already have and improve yo ur skills.The most important question you can ask yourself today is this Can I generate value?If the answer isno, then make it your first priority turn that into ayes. Figure out how successful people are rewarded. You cant learn that from one article. Read books, study investors, try things out, talk to wealthy people, etc.You want to generate value- either by working for it or investing. And whether you get paid 10 bucks on 10.000, the principles of value creation are always the same. A person who can make a grand can also make ten grand, and so forth.When you find out how to make your bank account grow instead of decreasing it, youre already on the way to make your net worth grow.Thisarticlefirst appeared onDariusForoux.com.