As part of the COVID-19 Prevention, Stay Home and Do The Five

10 Basic Rules of Finance, Investments and Financial Investments

Money, All image credit: GettyImages

I stumbled upon a thread on Twitter written by Bayo Adeyina @greaterbayo  and I was really intrigued by the title alone. Then, I realized it was time to end my bewilderment and delve deep into the content. Then, I looked, started scrolling down gradually as I read through every post in the thread, and in the end, I had admitted that the post is a life-changing testimony as far as finances, investments and financial investments are concerned.
In his thread, he started by narrating a story of how one of his mentors wanted him to render some assistance to one of his family members but the mentor had insisted that he remains anonymous while Bayo stands in as the third-party. And the interesting story goes all the way on, but as he continued, I was able to pull out some important keywords from the introductory statement including:
  • Taking financial responsibility
  • Knowing when not to invest in a business idea and
  • Being wary of new "investment schemes"
In recent times, we all realize that most people have been deprived of financial accountability. Many businesses have gone under, monies have been lost by many people and there is no sign that these losses are getting any less common.

Many money schemes and online investments have surfaced in recent times. Whereas, I cannot rule out that some are genuine but a huge proportion of these schemes are fake and fraudulent. Hence, the need to know about these 10 basic rules of finance and investments.

One thing worth knowing is that the success of any entrepreneur or business manager grossly depends on how well that entrepreneur is able to manage his/her finances. Financial management in these times of scarcity is an important skill for any entrepreneur or business manager.
Just before I go on to tell you the 10 basic rules for finance, investments and financial investments, let me quickly tell Bayo's story about how the mentor who wanted to help one of his family members made that family member sign an agreement bearing Bayo's name because the mentor could not trust that family member to handle the funds efficiently by himself.

Now let's hop right into the ten basic rules for finance, investments, and financial investments. 
Note that, financial investments are investment schemes in which you put some money aside with the expectations that it will grow with interests after a given period. This terminology is set aside from the other more tangible form of investments.

10 Basic Rules for Finance, Investments and Financial Investments

  1. Avoid lending money to friends and family as much as possible
  2. Investigate properly before you invest
  3. Do not get absorbed by gains too easily
  4. Recognize the process
  5. Before you borrow for a startup, make sure you have dusted your books over again
  6. Keep birthing new investments
  7. Always make and implement a budget
  8. Don't borrow for ostentation
  9. Save less than you invest
  10. Don't give up

Avoid "Lending" Money to Friends and Family as Much as Possible

This is one basic rule of finance and investments. Lending money to family members and friends with the expectation that they will pay back has always been fraught with great disappointments that have often led to enmity, hatred, and disunity. Financial accountability is one major instrument required to manage your funds properly and no matter how careless one is, the awareness that the consequences will be grave if they don't fulfill their part of the deal can be an extra push to become more accountable.
However, when you lend money to family members and friends, the ties and relationship you already share with them can give them the leverage and freedom to conveniently use up the money as though they did not borrow it from you.
In this regard, it is important that you fix your mind to give to them what you can afford to forget if they default in order to avoid unnecessary riffs to your union and relationship with them.

Investigate Properly Before You Invest or Take Risks

With the rise of many investment opportunities, you should be wary before you say "I do". It is important that you take time to investigate each and every opportunity you are interested in before you hop right in. Little questions like the how's, why's, and how's could save you a fortune.
Every business opportunity has its own risks and challenges, and you can only succeed at it if you know the risks already and you work on your strengths to overcome them. The first warning sign is when they present the business offer without revealing what the risks are.
Another thing your investigation should comprise of is your thorough assessment if you can fully handle the offer even if it were genuine. I have had to fail in many offers I accepted too quickly or because someone I trusted recommended it. You can believe testimonies from people to an extent but never jump in too quickly
This must not be confused with fear of taking risks. But when it comes to financial investments, where there is really no tangible business involved, you must be extremely careful. I am assuming you read what financial investments are already.
In any case, you can never find out the truth by solely listening to the testimonies of others. You must find time to do your own questionings and investigations.

Do Not Get Absorbed By Gains Too Easily

If a deal is too good to be true, then it's probably is. This is one common precautionary statement as far as online investment scams are concerned. Whatever seems too good to be true has up to 99% chances of being the way it seems - too good to be true. Before you invest your money into anything, you to investigate carefully but it further raises a warning flag if presents and offer that is too good to be true.
I have written about how to identify online scams and avoid them and in that post, one of the points I focused on is recognizing that almost every deal that seems too good to be true is probably too good to be true.
If you look out to double your money in financial investments, Frank Hubbard has a recommendation when he stated that "the safe way to double your money is to fold it over once and put it in your pocket". Frank in this quote was contrasting between safety and growth. When you are going to invest in stocks, you have to accept that your money is at risk, meaning it can lose value. On the other hand, it can also yield compensated returns. However, if you always want to play it the safe way, you will not experience growth because merely folding your money once and putting it in your pocket does not in any way double the value of the money.
The only challenge is knowing when and what to invest in and not.

Recognize The Process

The best way to get rich is to do so steadily and sustainably. The quest for over-night wealth usually ends up with a life of regrets. You must recognize the importance of the process.
I was discussing with one of my mentees one day when I mentioned to him, "it is a great thing to start small because in so doing you actually know how to make it big". I paused a while before I added the second part for more clarity. "If you are given a very huge amount now, without the knowledge of financial management which you will learn as you grow, you will squander that money to the minimum zero without anything to show for it".
Some of these principles have very living proofs but so many people are just not ready to live by them and they end up regretting how they have wasted their lives pursuing what should run after them the moment they discover the secret.
If you really desire to be wealthy, never turn off the slow phases, they are what builds you up for greater success.

Before You Borrow For Startup, Make Sure You Have Dusted Your Books Over Again

There are different sources of capital for start-up and you are free to explore any of them if you feel it is the most adequate source. Just a little recap on the source:
  • Personal funds
  • Loans from banks
  • Money from friends/relatives
  • Government grants
  • Business angels/angel investors/venture capitalists
  • etc
But if you are going to opt-in for borrowing, you need to be sure that your business plan has been reviewed over and over again. You must have known your risks, challenges, opportunities, and strengths. This is important because borrowing money usually come with some interests and price to pay should you default. You don't want to lose your collateral because you were too hasty to borrow.
Borrowing from friends and family may not confer very severe consequences when compared to those from other sources, but like we already talked about the consequences may be more material than financial, if peradventure, you fail to deliver your own part of the deal (pay back the money) at the set time.

Keep Birthing Newer Investments

If you understand the principle of sowing and reaping, you will understand business growth is about planting a seed that will multiply to greater returns. For sustainability to be achieved, you must learn to keep investing. Keeping your eggs in one basket can sometimes be disastrous, or at the least scenario, you would experience periods of financial draught in your economic year.
If you truly desire to stay ever-green all year round, you have to learn to diversify your private and/or corporate economy.
When you make profits, you can choose to use up all your profit and start all over with your initial capital, or you can decide to set aside some part of that profit for more investments. That's as easy as you replant your seeds after your previous harvest, and if you think really hard about what to invest in, that would be a topic for another day.

Always Make and Implement a Budget

I have had one magical experience with budgets that made me realize how budgets actually work. I had made my budget for my expenditures before a financial source opened up. So I kept the budget aside and it was time to get my basic needs and investment needs met. It was magical because I really kept the budget note aside, really away from immediate checking and re-checking. Then, after some time of sorting things out, I had a need to check back at what my budget says and abracadabra! I have been spending within the limits of my budgets. How did that happen?
A budget helps you to keep track of your expenditures in relation to your income, and what is even more interesting about it making a budget is that you also need to adhere to it. From my experience, I can be sure that adhering to a budget isn't that difficult if you cultivate the habit of carefully scrutinizing every one of your spendings. After all, you were the one who made the budget, weren't you?
In the words of Ayn Rand, "Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver". If you don't want to drive to places you never intended, you need a budget to do that. This is important because you may get lost and never find a way to come back the way you went. Don't ask me how that would happen. Were you the driver?
Becoming the driver requires diligence and hard work up to the point when you have gained financial freedom. 
Still, on the importance of budgeting, Dave Ramsey once said, "A budget is telling your money where to go instead of wondering where it went".

Don’t Borrow For Ostentations

Ostentations are things you display in a way to show off how wealthy you are. They are designed to impress and show luxury. No one says items of ostentations are not important but you must deliberately work your way up to the point when you would deserve them or be truly worth them.
Many people buy items that they are not worth and to make it worse, some could go great lengths to get them even if it means having to borrow. But you must avoid borrowing for things that will are basic or essential to your livelihood. There is no need to accruing debts for items that can be considered liabilities. Instead, live within your means while you aim to improve your financial standings.

Save Less Than You Invest

In other words, invest more than you save. When you save, you leave your money to stay subject to natural phenomena. It could appreciate or depreciate in value depending on the prevailing economic circumstances. But in these times, when depreciation is commoner, saving as raw cash could cost you a lot more than you are trying to avoid.
Saving is never considered the best option as far as investments are concerned. Therefore, you must seek ways to invest some of your cash rather than trying to simply stock it up somewhere.

Don't Give Up

I am adding this because we all realize that not all investments pull through the way we dreamt them to be. But if you must attain mastery, you must be resilient to stand back up again and ask yourself what you can do better. Failure is not when you fail but it is when you give up on the desire to succeed, probably because you failed a number of times. Don't give up.

Prosper Yole

I am a lifestyle blogger, I write useful articles on successful life tips and hacks. Posts bearing Prosper Yole as author are either written by the blog author himself or by our various other contributors. Thank you for reading through. I look forward to having you more often. Please subscribe to my blog and follow me on Twitter @ProsperYoleOfficial

Contact Form


Email *

Message *

All-Time Favourites