Upper classes are a nation’s past; the middle class is its future. Ayn Rand

The irony is middle-class earners are busy earning money and aspiring to become rich. In the process, they just ignore the very process to enhance their financial wellbeing.

We were not taught financial literacy in school. It takes a lot of work and time to change your thinking and to become financially literate. Robert Kiyosaki

Here are 8 basic rules when you think about managing your hard-earned money.

1. Earn but save

People (employees) work for the entrepreneurs and they become rich. Money should earn for you, not you only. This is the way one becomes rich. The money will earn for you when you save from your earning and invest.

Therefore, starting to save earlier in life is vital.

2. Invest but don’t be greedy

You become financially free when your passive income exceeds your expenses. T. Harv Eker

 You need to invest to make money work for you. Investing in safe and reasonable return earning instruments will grow your income /wealth without you working for it.

But here is a caution.  There are several fly by night companies out there to loot your money. This is another reason self-literacy of your own financial affair is critical. Dependency on financial advisors, insurance agents, investment consultants is good but risky too. Most of them are driven by their own financial interests rather than your interests.

Understand the risk involved in all kinds of financial instruments, do not get swayed by the promise of unreasonably high return, be safe than sorry.

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3. Diversify but assess the needs

The most important key to successful investing can be summed up in just two words-asset allocations.  Michael LeBoeuf

Diversification is good but not without knowing your life stage needs. Know the type of investment from short term, long term, liquidity, illiquidity, return and risk perspective and decide.

This is called asset allocation. Read more: Do You Know Asset Allocation is the Key to a Successful Financial Planning?

4. Insure but don’t be confused

Insurance is for risk management not for earning a return. People usually are confused (misguided by insurance agents) and consider insurance as an investment tool.

Mutual Funds are investments. There are various schemes to cater to the needs of the objective of all kinds of investors.

Use life insurance just to cover your life risk. Go for minimum premium and high coverage policy.

5. Spend but also donate

No one is useless in this world who lightens the burdens of another. Charles Dickens

 You earn for yourself, spend on your needs and wants but also be socially responsible and help the needy.

Our security guard always participates in Joy of Giving week we celebrate. His salary is quite less and even contractors take his share from the salary. Yet he makes sure to donate.

Donate according to your capacity but do it. There are needy people who are downtrodden and expect haves to help them living, surviving.

6. Built Asset but keep records

Many people invest in various assets, shares, mutual funds, maybe real estate, insurance, FDs, bonds, etc. etc. But most of us fail to maintain a proper record.

Maintaining a record of your investment up to date is mandatory. In the absence of proper records, your hard-earned money and investment would go helter-skelter.

This is the mistake most middle-class investors do. They believe record keeping is good for rich people who have many investments across the spectrum. This is a myth. Record keeping is ideal and best practice for every investor.

7. Educate your Children but make your wife financially literate

Formal education will make you a living; self-education will make you a fortune. –Jim Rohn

This is crucial. Like the previous one making your wife financially literate is key. You earn and invest for her financial security but when she is not aware and literate about your investment records, how to liquidate when needed, she would be dependent and hence vulnerable.

Educating wife about financial matters is as mandatory as it is to educate your children by sending schools.

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8. Finally, be rich but live life

Every day is a bank account, and time is our currency. No one is rich, no one is poor, we’ve got 24 hours each.  Christopher Rice

Don’t go after money your whole life. Money is a means not an end. Periodically take stock of your monetary need. Make a plan to retire, make a plan to live your dream, passion, which is beyond just earning money.

Most people do not know what to do with their life beyond earning money.

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This basic understanding is necessary when you think about your money. In fact, this will take care of all you need to know about money and investing.