25 Rules To Grow Rich

Below, you’ll find the rewritten list of rules. Each rule is linked to an article that describes the original rule from the Money article, the investigation of that rule, and the conclusions that led to a rewrite of the rule. After that is a discussion of this project in general, including what it taught me about the media and citizen journalism. As an addendum, I’ve also included Money’s original rules.

25 Revised Rules to Grow Rich By

Rule 1: For return on investment, using quality materials and a cohesive design provide the best returns on a home upgrade. Bathroom and kitchen upgrades add the most equity.

Rule 2: It’s worth refinancing your home only if you can reduce your overall costs including the added refinancing costs.

Rule 3: Go no more than two and a half times your income in overall debt to buy a home. For a down payment, only exceed 20% if you don’t think you can beat the interest rate in investments.

Rule 4: Your total housing payment should not exceed 30% of your net income. Total debt payments should not exceed 40% of your net income.

Rule 5: Never hire anyone to provide a nontrivial service for you if they cannot provide quality references.

Rule 6: All else being equal, the best place to invest is in an investment plan through your work benefits up to the full company match. After this, invest in a Roth IRA. Still have money to invest? Put it in a place that you can easily access in ten or fifteen years, like an index fund.

Rule 7: To figure out what percentage of your money should not be in stocks, sutract 30 from your age and then double that number.

Rule 8: Invest no more than 5% of your portfolio in your company stock - or any single company’s stock, for that matter - unless you are exceptionally well-educated on the company; even then, don’t go above 10%.

Rule 9: The only way you should compare mutual fund returns is by first subtracting the fees off the top of any fund; this will expose the true value of the fund.

Rule 10: Aim to build a retirement plan that contains 25 times the annual amount you want to have when you retire. So, if you want a total income of $60,000 each year when you retire, you need to have $1.5 million in your retirement account.

Rule 11: If you don’t understand how an investment works, do some research before you invest; don’t just write it off.

Rule 12: If you’re not saving 20% of all of your income in excess of $20,000, you aren’t saving enough.

Rule 13: Keep two months’ worth of living expenses in a bank savings account or a money market account for each person in your household. So, if four people live in your household, have eight months’ worth of living expenses.

Rule 14: Aim to accumulate enough money to pay for what four years of undergraduate tuition would cost for your child at the institute of your choice on the day he or she was born. The rest can be borrowed or covered when the time comes.

Rule 15: You should leave behind a year’s worth of life insurance to cover your funeral, plus two years’ salary for each dependent you claimed on your last tax return (including yourself).

Rule 16: When you buy insurance, compare the packages at multiple insurance providers with the highest deductible you can afford. It’s the easiest way to lower your premium.

Rule 17: The best credit card is a no-fee rewards card that can earn you at least 1.5% in return that you pay in full every month. But if you carry a balance, high interest rates will wipe out the benefits.

Rule 18: The best ways to improve your credit score is to pay bills on time, to reduce the balance on your credit cards, and to not cancel old cards when you’ve paid off their balance.

Rule 19: Anyone who contacts you at any time and requests personal information of any kind is a scam artist. You should initiate all contacts that require a personal information exchange.

Rule 20: The best way to save money on a car is to pay cash for a late-model used car and drive it until it’s junk. A car loses 30% of its value in the first year.

Rule 21: Never lease an automobile.

Rule 22: When a new gadget or computer comes out, select the model you would like to buy, then wait three months for the price to lower. If you still want that model, buy it; if not, move on or select a new model and start a new three month wait.

Rule 23: Save money on airline tickets by buying early, comparing rates, and being flexible when it comes to carriers and options.

Rule 24: Don’t redeem frequent-flier miles (or points from any bonus program) unless you can get more than a dollar’s worth of air fare or other stuff for every 100 miles (or points) you spend.

Rule 25: When you shop for electronics, don’t pay for an extended warranty.

What Did I Learn?

What I expected to find is that all of the rules were actually based on some clear and comprehensible logic, as you would expect from an article produced by a widely-read mainstream publication on personal finance issues. Instead, what I found was a list of “rules” that was occasionally on target, but often led to ideas that were as fiscally unsound as can be.

What did I learn from this?

First, I learned that you shouldn’t trust something simply because the mainstream media says it. If you’re considering making a major decision in your life based upon what you read in a mainstream news article, investigate it first! Go to other information sources for comparison and apply your own common sense.

Second, blogs can serve a critical role as an observer of the mainstream media. Although this has been shown again and again in the political realm (see the downfall of Dan Rather, if nothing else), it’s great to see that it works in any realm. Blogs can investigate the information behind a story and tease out the truth behind it, because blogs are fueled by passion above all. If it wasn’t for the passion, most of us wouldn’t be here.

Third, citizen journalism really works. If you research a topic, write it up, and post it, people will find it. Google is the most powerful thing on the internet; it enables the people who invest their time and energy into investigating media topics to connect with the people who are curious enough to search for items on the web. It is the new possibility of this connection between citizen journalist and reader that makes it possible to inform the world.

Beyond all of this, I learned quite a bit about the basics of personal finance, including some surprising miscues that many people make.

Money is Power

“Money is power.” This mantra is proclaimed again and again by businesses, politicians, and marketers. Most of us would have to admit that we give a certain amount of power to money. And if we are honest, most of us would admit that we find it nearly impossible to detangle money and power. So maybe we would do better to focus our energy on how we can make positive use of the power of money. One question to consider is, “What power to lead and influence others can spring forth from a more godly use and management of our resources?”

U.S. society can encourage us to comply with policies and actions that strengthen our own position, wealth, or security—and that also, whether consciously or not, hurt God’s children who are materially poor. This isn’t new to our time. The prophet Isaiah warned:
Doom to you who legislate evil, who make laws that make victims…

What will you have to say on Judgment Day, when doomsday arrives out of the blue? … What good will your money do you? (Isaiah 10:1,3, from The Message)
What will we say on Judgment Day if our society makes laws that victimize—laws that make misery for the poor, rob destitute people of dignity, exploit the defenseless, take advantage of innocent children?

Speaking out of the same prophetic tradition in the context of Judgment Day, Jesus provides an alternative way to experience the power of money in Matthew 25:31-40. Jesus shows how the power of money and resources can be used to do good for others:

I was hungry and you fed me,I was thirsty and you gave me drink,I was homeless and you gave me a room,I was shivering and you gave me clothes,I was sick and you stopped to visit me,I was in prison and you came to me.

Whenever you did one of these things to someone overlooked or ignored, that was me—you did it to me.

Money and power, power and money: Maybe they can’t be detangled, but that isn’t all negative. Instead we can listen to Jesus’ words and use the resources we have—as organizations, as families, as individuals—for the good of others.

Making Money: Why should u work?

This is where you might be saying, “But I’m just a kid! I shouldn’t have to work!” That’s right; you probably don’t have to, but here are some reasons why you may want to:

• Earning is learning. By working to earn your own money, you’ll be learning skills you’ll need to succeed in the world. These skills can include things like dealing with money, understanding what customers want and need, getting along with people, using tools and technology, using your time and materials wisely…and many more.
• Money gives you choices. If you want to see a movie, get that great video game, or go out for burgers with your friends, you’ll need cash to do it. When your allowance money runs out, does the fun run out, too? With your own extra money, it doesn’t have to. A parent may want you to save some of your earnings or have rules about what you are and aren’t allowed to buy, but as long as you stick to those guidelines, money you earn for yourself is yours to spend as you choose.
• Independence is a great feeling. Some people think that asking for money is a lot easier than earning it, and if they beg a parent long enough, they’ll get that twenty bucks to spend at the mall. But when you make your own money, you don’t have to depend on someone else to hand you something. Five dollars that you’ve earned will probably feel a lot better in your hand than twenty dollars that you begged for, and there’s nothing like the proud feeling of taking your very own money to the bank or store.
• It beats being bored. How many times have you been bored out of your skull, sitting around the house, convinced that there’s absolutely nothing to do? Well, how about coming up with a plan to earn some money? That can be a great way to break through the boredom. By using your brain and your body to do jobs and make cash, you’ll get energized, have a good time, and make the hours fly by. Resist the temptation from TV, radio, and magazine ads that may be telling you the opposite: that the only way to have fun is to spend money by going to the movies, buying clothes, eating junk food, etc. After that fun is gone, the money is, too!

Okay, so we know why we should make money…but where do we do it?

Make Money, What can i do?

To help you figure out what you can do to make money, think about these things: your talents, your interests, your resources, and the market.

Your talents

Before you think seriously about some moneymaking ideas, think first about yourself. You’ll do better at your job if it’s something that “plays off your strengths,” meaning it involves the things you’re naturally good at. Here are some talents and skills. Which ones describe you most?

Physical strength
Good at sports
Good with directions
Good memory
Creative
Outgoing personality
Caring and patient
Reliable (people can count on you)
Punctual (always on time for things)
Good organizational skills
Strong attention to detail
Good with money or numbers
Good with your hands
Good with machines or technology
Good at school subjects

Your interests

So you’ve thought about what you’re good at…now, what do you like to do? Some people think that a job isn’t something you’re supposed to enjoy, but imagine how cool it would be if you could make money doing things that make you happy anyway? The money would just be a bonus!

Here’s an idea: think about what you would have fun doing even if you didn’t get paid for it. Then, try to come up with a way you could do it for money. If you can’t, think of something else you enjoy, and keep on going until you find something that works.

Or, you could do the opposite. First, think of a way that kids try to make money. Then, picture yourself doing this. Is it interesting? Is it exciting? Are you having a good time? If so, it may be a good choice for you.

Your resources

Resources are the materials you need to do a job, like equipment or supplies. Take a look around your home and make a list of the things that could be used to make money. You might have a video camera, a great computer system, a shed full of lawn and garden tools, or a closet full of art supplies. Once you have your list, try to picture what kinds of jobs these things suggest. How could you use the computer to make money? Or the video camera? Or the garden tools?

The market

In the business world, “the market” doesn’t mean the grocery store. It means how well a certain product (say, lemonade) or a certain service (say, lawn mowing) is doing. If the market for something is “good” or “strong,” you stand a good chance of doing well and earning money as long as you work hard. If the market is “bad” or “weak,” it may be more difficult to do well.