The best advice I ever got about money came from my dad.
These are principles I’ve used whether I was washing dishes in a restaurant or running a multimillion-dollar business. As a result, I’ve always been in good shape financially.
The first piece of advice he gave me was to “stick to what you know, kid.” I know enough to know that there’s a lot I don’t know — certainly things that could get me into trouble financially.
Stick to What You Know
For example, I cook a hell of a steak. World class. It’s up there with the best you’d eat in the finest restaurant. People love to be invited to my house for Steak Night. That doesn’t mean I should open a restaurant.
There’s a lot to managing that kind of business that I simply don’t know. So, I have no interest in owning a restaurant. I would only lose money.
I know people who do own restaurants, though. And most of them shouldn’t. They got lured by things like drinking “free booze” and flirting with the staff. It’s a tough business with crappy margins. And they have no idea what they’re doing.
They’ve lost boatloads of money.
In investing terms, this is like Warren Buffet’s advice to stay within your circle of competence. When you give it some good thought, that circle is probably kinda small. At the very least, it’s smaller than we assume it is.
It’s easy for us to believe we know more than we really do. Our ego wants us to feel like an “expert.” But that same ego gets in the way of securing and growing our net worth…
Check it at the door.
If you stick with what you know, it’s hard to get into trouble financially. You’ll find yourself naturally turning down opportunities you have no business getting involved with. Meanwhile, you’ll gravitate toward projects that pad your bottom line.
Cash Is King
The second piece of advice is to pay cash for everything. I’ve stuck with that advice too.
The only exception is that I had a mortgage for 11 years. But, even though I started to make a lot more money, I resisted the temptation to buy a bigger or more expensive home. Mine was perfectly fine; it’s actually a beautiful place to call home. I just paid off the mortgage faster.
Here’s the thing: The more we make, the more we don’t need to spend.
If you stick with cash, you’ll find yourself not being as wasteful. It makes it harder to buy things that are out of reach and, in the end, don’t make you happier.
To paraphrase my favorite comedian, George Carlin, you don’t get rich buying shit you don’t need with money you don’t have and paying 18% interest on it.
That’s the key to Unbounded Wealth: Don’t keep up with the Joneses.
It might look like they’re rich with their two cars, fancy watches, and five flat panel TVs. But most of it is bought on credit. It’s a mirage.
The average American can’t even finance a $1,000 emergency. Scary!
Stick with what you know. And pay cash.
Following that advice will get you well ahead of the game and well on your way to freedom – financial and otherwise…