Mark Cuban is a pretty successful guy. He rose from a working class background and “barely being able to afford college” back in 1981, slumming in bars and as a software retail salesperson, to become one of the richest people on earth with a net worth of $3.2 billion. The dude also kills it on Shark Tank.
When Cuban talks about money, you should listen. That’s why my attention got grabbed harder than my doodle during a high school handjob when Cubes told Entrepreneur Magazine that the best way to make money in investing is to just “don’t.”
Cuban then outlined three basic things you can do to improve your financial situation right now. Let’s break them down:
1. Buy in bulk
Do a budget and look at the things you buy repetitively and then go and buy those things in bulk. “Stuff you’ll need all year, like toothpaste, shampoo and soap” are among the non-perishable personal care items he suggests stocking up on to save money.
“As long as you’ve got a little room under your bed,” he says, “if you buy a year’s worth or even two years’ worth of toothpaste, you’re going to get a 50 percent discount. If you save $1,000 a year doing that, that’s more than you’re going to earn on $10,000 in investing.”
Cuban apparently still buys his toiletries in bulk, which is proof that success and financial stability is really a mindset more than anything else. This is also the kind of advice someone who was self-made would give, because Cuban lived the broke life just like the rest of us when he was in his 20s. When he moved to Dallas originally, he crashed on the floor of an apartment with six dudes and used to drive around looking at big houses as motivation to carry him to where he is today.
Success in the absence of sheer luck requires sacrifice, frugality, and discipline. Couple that with aspiration and you’re building a solid foundation for the future.
2. Stash six months of income in the bank
For most people, Cuban admits, six months’ worth of “income in cash in the bank might not be that much,” not compared to his envy-worthy nest egg at least, but he feels that just knowing it’s there “for a rainy day” can provide some peace of mind. “I know it doesn’t earn much in the bank,” he says, “but you’ll sleep a lot better.”
Cuban has long said that the stock market is a risky game “for suckers.” That’s why you want to have that money in the mattress, that savings, so you’re protected in case something goes wrong.
This is sound advice for a number of reasons. You definitely shouldn’t start investing if you have no nest egg or safety net. While it’s true that stocks tend to hold their value in the extreme long run if you’re diversified enough, when you’re starting out, you want to make sure some of it’s liquid in case you need it.
Find out what you need to live from your income and makes sure there is enough to take care of obligations like rent and debt. Pay off debt first. Take what’s left as your “disposable income” and set up a regular withdrawal into your savings. You’ve lived on less in college. and you can do it again when you graduate. This will force you to save. As an added boost, set it to go into a 401K, where you won’t be able to touch it except for extreme emergencies. It will also decrease your tax burden every year.
3. Pay off your debt
Cuban says the single best thing you can do for your bottom line is to pay off your credit card debt. Better yet, never rack up a penny of it in the first place. “Credit cards are the worst investment,” he says, “unless you pay them off every 30 days. Even then, don’t do it.” Like the rest of us, he wishes someone would have told him that when he was in his 20s.
With student loans being what they are, debt might seem unavoidable these days. But there is a difference between constructive debt (like mortgages and student loans) and the bullshit that kills you financially (consumer debt and car payments). You can and should avoid the latter. Making sacrifices now can pay off huge in the future. Also, if you must have a credit card, there are several that carry very low APRs (9% or less) that you can use like a debit card. Check out USAA if you or your parents are in the military. You can also jump between accounts that carry introductory 0% APRs and open/close cards every few years. Be smart about it.
Cuban calls debt “the ultimate dream killer,” and he’s right. Not only does debt tether you down, it actually reduces your freedom to take risks that might really change your status like Cuban did, keeping you in a job you hate and limiting your ability to try something new.
The Take Away:
Now that you’ve reached the end of the article, you might still be wondering, well okay, Mark, this is all good financial advice, but how do you really make the big bucks?
I can’t speak for Cuban on this one, but his actions (and the actions of successful entrepreneurs worldwide) speak for themselves. Cuban, like TFM founder Madison Wickham, partnered up with a friend, started a business around something he loved (in Cuban’s case it was college basketball and webcasting), and really just drilled it.
When you invest in yourself and do something you’re passionate about, success tends to follow (HUGE DISCLAIMER: it has to actually be a good idea, and you need to have some talent at it. Know thyself. Can’t stress this enough).
Even if you don’t make a billion dollars, you’ll be happier than slaving away for the man. And in the end, that’s what life is really about..
[via Entrepreneur Magazine]
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