Nine Money Rules to Live By

Here's an article from Money Central that lists nine money rules to live by. Their list:

1. [Knowing] the difference between needs and wants.
2. Scarcity makes your choices for you
3. The pointlessness of the hedonic treadmill
4. Every money decision has a cost of its own
5. Why supply and demand rule
6. Throw no good money after bad
7. The role risk plays
8. The time value of money
9. The miracle of compound interest

Here are my thoughts on these:

1-3. The first three are related in my mind. People simply need to realize that they need relatively little (food, water, shelter, etc.), want a lot (of which they need to choose what to buy and what not to buy), and desire many things that simply aren't practical given their finances (a second house, an expensive vacation every year, etc.)

4. Regarding item #4, I want to share this quote:

The good news, of course, is that even with opportunity costs, college is a slam-dunk for most people. The average graduate makes 70% more over his or her lifetime than someone who stops with a high school diploma.

Ha! I couldn't have said it better myself -- though I already did. ;-)

5. I think the supply and demand point is not worthy of this list.

6. Yep, I've been here -- mostly in my early investing days. This is a lesson that every investors usually learns the hard way -- and if they don't learn it, they end up losing a ton of money through the years.

7. Pass. I wouldn't put it on the list.

8-9. These two are linked together -- they highlight the connectedness between money and time. Additional thoughts from me can be found buy reading The Power of Compounding and The Power of Time.

Here are a few other rules I would add to the list:

• You must spend less than you earn -- it's a proven way to become wealthy.

• Your career is your most valuable financial asset, offering you many financial benefits. You can make the most of it by getting a college degree and managing your career to its full potential. Doing this well can earn you millions of dollars in extra income throughout your lifetime.

• There are some simple principles you need to follow if you want to be rich. Nothing complicated, but very effective. Related articles: How to Become a Millionaire (How to Become Rich), The Richest Man in Babylon: Seven Cures for a Lean Purse Part 1, Start Thy Purse to Fattening, The Richest Man in Babylon: Save a Portion of All You Make, and Poverty to Prosperity.