I keep coming back to finance as the topic for my blog posts, but I think it’s just that important to learn about and strive to master our skills with money. Whether it’s for businesses, organizations, governments, or for personal use, money is a tool that greatly influences our daily lives. It’s also something that has been with us for thousands of years. We have both examples and principles that work and that do not work. Not all the rules are everlasting, but I believe that the best ones are.  

Here are 5 rules that I find most helpful and that helped me get a better understanding of and positioning to use money I earn to benefit my family, friends, company (as Rocksoft’s CFO) and many people around me.

‍

1. Time is money.

Yes, it is one of the most known clichés, but if understood correctly it will mean a lot to us, our friends, family and coworkers. First, let’s just underline that “time is money” doesn’t mean that we cannot spend time on things or activities that don’t earn us any income. Not at all, no worries - you can still watch your favourite tv show or read your favourite novel every now and then. We can and should still spend time with our kids and friends and perhaps also use some of our money on them too. But back to the principle.  
What the famous phrase - supposedly coined long ago by Benjamin Franklin - was meant to help us with is understanding one’s time and the value that can come from using our time wisely. We need time to build wealth, we need time to build useful tools, websites and applications, we need time to do good work and we need time to rest, travel and experience things. And the time is one of those few things that are scarce.

Here’s a short story of how Franklin saw the value of time while still running his newspaper establishment.

"What is the price of that book?" at length asked a man who had been dawdling for an hour in the front store of Benjamin Franklin's newspaper establishment. "One dollar," replied the clerk. "One dollar," echoed the lounger; "can't you take less than that?" "One dollar is the price," was the answer.

The would-be purchaser looked over the books on sale a while longer, and then inquired: "Is Mr. Franklin in?" "Yes," said the clerk, "he is very busy in the press-room." "Well, I want to see him," persisted the man. The proprietor was called, and the stranger asked: "What is the lowest, Mr. Franklin, that you can take for that book?" "One dollar and a quarter," was the prompt rejoinder. "One dollar and a quarter! Why, your clerk asked me only a dollar just now." "True," said Franklin, "and I could have better afforded to take a dollar than to leave my work."

The man seemed surprised; but, wishing to end a parley of his own seeking, he demanded: "Well, come now, tell me your lowest price for this book." "One dollar and a half," replied Franklin. "A dollar and a half! Why, you offered it yourself for a dollar and a quarter." "Yes," said Franklin coolly, "and I could better have taken that price then than a dollar and a half now."

The man silently laid the money on the counter, took his book, and left the store, having received a salutary lesson from a master in the art of transmuting time, at will, into either wealth or wisdom.

– From Pushing to the Front by Orison Swett Marden

‍

2. Build a 6-month emergency fund.

This principle is logical and simple in theory, but much harder to execute in practice. It needs our time, focus and continuous attention, because we need to understand both our income and our monthly costs of living or running a business. We need both these information to set a proper goal and choose a realistic timeline to achieve it. Luckily, after spending not all that much time on getting our heads around the correct numbers, we should be ready to set a clear goal and start saving a portion of our monthly income to build our emergency fund. 

There are some tricks that can make the whole process easier to execute. One thing I am doing and would recommend is to split the emergency fund into 3 or 4 different currencies. How does it help? At least in two ways. 

First of all, it will decrease the country related currency risk which isn’t that small since we are talking about holding cash for a long-term time frame. In principle our holdings will be hurt by inflation so derisking our emergency assets by splitting them into 3-4 currencies (I do it like this for example: 35% PLN, 35% USD, 15% EUR and 15% GBP) will lower the risk of losing our value over time if one of the currencies performs worse than the rest. 
Splitting the fund into several currencies helps also in another way; it makes it much harder to spend the funds on something that isn’t an emergency. Holding an emergency fund in the same currency that we use for our daily spending can sometimes lead us to using parts of the fund on other things. We cannot do that if we are serious about building a robust emergency fund. Having the funds in different currencies will make it hard to use the funds - it’s like an additional obstacle for ourselves.

‍

3. Be ready in case opportunities arise

There’s a great short blog post about this written by Morgan Housel - I recommend everyone to read the whole thing here. He outlines his exact investment strategy for when the market will - inevitably - crash. Can we use the same kind of strategy in different areas of our life and in finance planning, perhaps? I believe so. 
The whole point of this strategy and exercise is 1) to prepare for worse economic periods and 2) to have a concrete plan for those periods so that we don’t let ourselves be led by our emotions. Both things are crucial because, as Housel proves in his post, worse moments for the market and economy in general always come - so not preparing for them would just mean that we are either too optimistic or too ignorant.

What I do personally is I set aside a bit of cash that is neither part of my emergency fund nor does it go into any of the investments. That way, I try to be ready for potential - unknown at the moment - opportunities that might arise if circumstances change. Doing this as a company can really help us get an edge over the competition, especially if combined with other finance-related strategies mentioned in this post.

‍

4. Do not purchase what you cannot afford

That is another simple rule that is not that easy to live by nowadays. “Well, I think I deserve it” - is something that often comes to mind, especially when our income grows steadily throughout our young career years. But how can I verify if I can afford something or not? One way to look at it is this: if you are in any kind of debt (not counting a mortgage), you probably cannot afford the thing you are thinking about buying. Will it always hold true? No, but in general asking oneself this question will help.
Additionally, it might be useful to make sure that I really need the thing we want to buy. What does it truly mean to me that “I must have this”. Shouldn’t we look at all material things we own in our lives as a weight - do the benefits outweigh the burden of owning that thing? Also – does the thing I am about to buy increase the chance of me learning new skills or help me potentially be more effective or will it bring more additional costs on me in the future.

In times of 0% rates on consumption-related purchases, it’s not easy to see clearly what we need and can afford, and what we should not buy. So here you need to activate your own compass that will guide you through your daily purchases in a way that will help your future self with regards to both your ownings and your finances.

‍

5. Be generous

My personal favorite. And I will keep it short. “Give and it shall be given unto you.” We are not wired to think like this, and it certainly comes hard to imagine how giving money away to others would somehow benefit us… and yet my experience is that it always does. And even if it didn’t benefit us financially – it benefits us hugely in other ways. But since we are not wired like this, we just need to try and test this way of living and see for ourselves what influence it has on us and our lives. And I really encourage everyone to go all in on this one. Most of you probably do it already anyway.

I like to catch and use those little chances and whenever I see a possibility to bless another human being, I try to do it. I give them something they might need or buy somebody a coffee or a meal. We will never regret doing good, so let’s just do it.

‍

That’s what I have for this time. I believe that every person who implements those 5 rules will do well financially in the long run, there’s basically no way around it.  

Thanks a lot for reading this post and if you would like to read my thoughts more often, I am trying to be active on X @osk_are. You can also have a look at apppelican.com where we share interesting and insightful articles, podcasts, books and videos every week.