40 Money Rules I learned from Tony Robbin’s Money Master the Game

On money

Money is simply a vehicle for trying to meet our needs.

What Money is Really For? After all, we don’t want to be a billionaire in the graveyard. These are what we are REALLY after: Happiness. What we want to pursue in our lives : be it starting a business, getting married, raising a family, traveling the world. Certainty and security. Freedom of choices and varieties. Significance and importance. Love and connection.Growth. Contribution to society and the world.

Money is nothing more than a reflection of your creativity, your capacity to focus, and your ability to add value and receive back.

Life is not about money; it’s about emotion. The real goal is to have the lifestyle you want, not the things.

It’s about keeping things in perspective and focusing on things you can control, like insuring that you’re doing as much as you can every day and giving it your all. You can never be out of balance in taking care of yourself as a person, taking care of your work as a professional, taking care of your family, your friends, your mind, your body.

On retirement and pension

Our parents didn’t have a duration of the complexity or dangers to deal with what we have today. They had a pension — a guaranteed income for life. They had CDs that paid conservative but reasonable rate.

The do-it-yourself pension system has failed….we exchanged our guaranteed retirement pensions with an intentionally complex and often extremely dangerous system, filled with hidden fees, which gave us “freedom of choice”.

Many have put their financial lives on autopilot and have accepted being part of the herd. “Hope” has become their strategy. There’s a social comfort in knowing that you’re not alone.

On income

Our paycheck alone — no matter how big — isn’t the answer.

Our earned income will never bridge the gap between where we are and where we really want to be.

Learn to work harder on yourself than you do on your job.

Income is the outcome (the goal of our investment should be income rather than return, growth, assets etc.)

On Savings

The best way to save is when you don’t see the money in the first place

The key to success: you have to make savings automatic.

Either you set up an automatic transfer from your checking account or set up an automated plan to send a specific percentage of paycheck to a separate account or retirement account.

Your financial future will flow from your ability to save systematically.

Ask yourself: do my expenses, big and small, bring me the thrill and happiness? Saving should not be about depriving yourself. It’s about adjusting your spending habits to mirror your core values and indulge only the experiences that truly matter to you. The deliberate spending allows you to invest in a quality of life that is sustainable and brings you joy.

On stock-picking

…In 2008 Merckle decided to make a bet in the stock market. He was so certain that Volkswagen was going down, he decided to short the company. Just one problem: Porsche made a move to buy Volkswagen, and the stock price shot up, not down. Almost overnight, Merckle lost nearly three-quarters of a billion dollars on that single gamble.

Most of the danger lies in the fact that what you don’t know can hurt you. (We don’t know what we don’t know).

The goal of the non-professional should not be to pick winners — neither he nor his ‘helpers’ can do that — but should rather be to own a cross-section of businesses that in the aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.

On investment

There are two phases to your investing game: the accumulation phase; in which you are socking away money for growth, and the decumulation during which you are withdrawing income.

What does the all-weather portfolio look like? … you don’t have to waste your time trying to pick stocks yourself or pick the best mutual fund. A portfolio of low-cost index funds is the best approach for a percentage of your investments because we don’t know what stocks will be ‘best’ going forward.

An investment operation is one which upon thorough analysis promises the safety of principal and an adequate return. Operations not meeting these requirements are speculative.

Yale’s David Swensen: there are only three forces that can help you achieve the greatest returns: asset allocation, diversification, tax efficiency.

What goes up will come down.

Timing is important. If you’re an investor, a mistake in timing can destroy your nest egg. The best opportunities come in times of maximum pessimism.

complexity is the enemy of execution.

On diversification

Diversity across time — that’s what dollar-cost averaging does for you.

Asset allocation is the theory, dollar-cost averaging is how you execute it. It’s how you avoid letting your emotions screw up the great allocation plan you’ve put together by either delaying investing — because you think the market’s too high and you hope it will drop before you get in.

The goal is to take emotion out of investing because emotion is what so often destroys investing success.

Dollar-cost averaging is how you make the volatility of the market work for you. What dollar-cost averaging really means is systematically putting the same amount of money across your full portfolio.

When you look at most portfolios, they have a very strong bias to do well in good times and bad in bad times. And thus your de facto strategy is simply hoping that stocks go up. This conventional approach to diversifying investments isn’t diversifying at all.

If your money is divided equally (between stocks and bonds), yet your investments are not equal in their risk, you are not balanced. You are really putting most of your money at risk! You have to divide up your money based on how much risk/reward there is — not just in equal amounts of dollars in each type of investment.

Create a process over time whereby risk control is the number one single most important focus every day.

On rebalancing

Another technique that will keep you on track is rebalancing. To be a successful investor, you need yo rebalance your portfolio at regular intervals (at least annually).

Rebalancing means when one segment does well, you must sell a portion and reallocate back to the original allocation. This should be done at least annually, and if done properly, it can actually increase the tax efficiency.

On investment losses

When you lose, you have to make significantly more to get back to where you started.

Rule no. 1 of investment (by Warren Buffett): don’t lose money.

On funds

Most people don’t do the math, and the fees are hidden. If you made a one-time investment of $10,000 at age 20, and assuming 7% annual growth over time, you would have $574,464 by the time you are 80. But if you paid 2.5% management fees and other expenses, your ending account balance would only be $140,274 over the same period (a difference of $439,190!)

On legacy

We all have to make sure that whatever wealth we build, however large or small it may be, our families benefit from it and don’t get stuck in a legal process that drains the gift from our heirs.