Golden Rules for Financial Freedom: Introduction

In the world today, we go through several years of schooling, but we are rarely taught how to manage our finances. Everyone has an income but some people become rich and others go bankrupt. I discover these golden rules of making money and keeping it. I narrow them down to about 20, and now I’m trying to apply them in my own life. These rules are ideal for someone trying to start a new business or a new career.


Here is what Barnum wrote about this matter circa 1800's:
"In the United States, where we have more land than people, it is not at all difficult for persons in good health to make money. In this comparatively new field there are so many avenues of success open, so many vocations which are not crowded, that any person of either sex who is willing, at least for the time being, to engage in any respectable occupation that offers, may find lucrative employment."


He's talking about niches in business, which are still relevant today.

"Those who really desire to attain an independence, have only to set
their minds upon it, and adopt the proper means, as they do in regard to any other object which they wish to accomplish, and the thing is easily done. But however easy it may be found to make money, I have no doubt many of my hearers will agree it is the most difficult thing in the world to keep it. The road to wealth is, as Dr. Franklin truly says, "as plain as the road to the mill." It consists simply in expending less than we earn;"

Expending less than we earn...sounds simple to me.

"that seems to be a very simple problem. Mr. Micawber, one of those happy creations of the genial Dickens, puts the case in a strong light when he says that to have annual income of twenty pounds per annum, and spend twenty pounds and sixpence, is to be the most miserable of men; whereas, to have an income of only twenty pounds, and spend but nineteen pounds and sixpence is to be the happiest of mortals. Many of my readers may say, "we understand this: this is economy, and we know economy is wealth; we know we can't eat our cake and keep it also." Yet I beg to say that perhaps more cases of failure arise from mistakes on this point than almost any other. The fact is, many people think they understand economy when they really do not."

So, is not that simple then...

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Expending less than we earn ALWAYS

The first golden rule.

"True economy consists in always making the income exceed the expenditure. Wear the old clothes a little longer if necessary; dispense with the new pair of gloves; mend the old dress: live on plainer food if need be; so that, under all circumstances, unless some unforeseen accident occurs, there will be a margin in favor of the income. A penny here, and a dollar there, placed at interest, goes on accumulating, and in this way the desired result is attained. It requires some training, perhaps, to accomplish this economy, but when once used to it, you will find there is more satisfaction in rational saving than in irrational spending..."

Cost cutting measures in your daily expenditure is the smart way to go, in order to carry out the first golden rule.

Necessities vs. Luxuries

We need a method for detecting our irrational expending.

"Here is a recipe which I recommend: I have found it to work an excellent cure for extravagance, and especially for mistaken economy: When you find that you have no surplus at the end of the year, and yet have a good income, I advise you to take a few sheets of paper and form them into a book and mark down every item of expenditure. Post it every day or week in two columns, one headed 'necessaries' or even 'comforts', and the other headed 'luxuries,' and you will find that the latter column will be double, treble, and frequently ten times greater than the former. The real comforts of life cost but a small portion of what most of us can earn..."

You take a notebook with you and write a two column list, necessities vs. luxuries, a very effective exercise in your new frugal lifestyle.


"Dr. Franklin says 'it is the eyes of others and not our own eyes which ruin us. If all the world were blind except myself I should not care for fine clothes or furniture.' It is the fear of what Mrs. Grundy may say that keeps the noses of many worthy families to the grindstone. In America many persons like to repeat 'we are all free and equal,' but it is a great mistake in more senses than one. That we are born 'free and equal' is a glorious truth in one sense, yet we are not all born equally rich, and we never shall be. One may say; 'there is a man who has an income of fifty thousand dollars per annum, while I have but one thousand dollars; I knew that fellow when he was poor like myself; now he is rich and thinks he is better than I am; I will show him that I am as good as he is; I will go and buy a horse and buggy; no, I cannot do that, but I will go and hire one and ride this afternoon on the same road that he does, and thus prove to him that I am as good as he is."

Some people are influenced by friends and neighbors of buying things they don't really need, they feel the competition from of having the best and newest items on the block.

"My friend, you need not take that trouble; you can easily prove that you are 'as good as he is;' you have only to behave as well as he does; but you cannot make anybody believe that you are rich as he is. Besides, if you put on these 'airs' add waste your time and spend your money, your poor wife will be obliged to scrub her fingers off at home, and buy her tea two ounces at a time, and everything else in proportion, in order that you may keep up 'appearances,' and, after all, deceive nobody. On the other hand, Mrs. Smith may say that her next-door neighbor married Johnson for his money, and 'everybody says so.' She has a nice one- thousand dollar camel's hair shawl, and she will make Smith get her an imitation one, and she will sit in a pew right next to her neighbor in church, in order to prove that she is her equal."

"My good woman, you will not get ahead in the world, if your vanity and envy thus take the lead. In this country, where we believe the majority ought to rule, we ignore that principle in regard to fashion, and let a handful of people, calling themselves the aristocracy, run up a false standard of perfection, and in endeavoring to rise to that standard, we constantly keep ourselves poor; all the time digging away for the sake of outside appearances. How much wiser to be a 'law unto ourselves' and say, 'we will regulate our out-go by our income, and lay up something for a rainy day.' People ought to be as sensible on the subject of money-getting as on any other subject. Like causes produces like effects."

People we see in the media are a source for our feelings of inadequacy, we want to imitate their life style. We compare ourselves to them, their superficial life to our inner life.

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Financial nest egg and real estate

"You cannot accumulate a fortune by taking the road that leads to poverty. It needs no prophet to tell us that those who live fully up to their means, without any thought of a reverse in this life, can never attain a financial independence. Men and women accustomed to gratify every whim and impulse, will find it hard, at first, to cut down their various unnecessary expenses..., and will feel it a great self-denial to live in a smaller house than they have been accustomed to, with less expensive furniture, less company, less costly clothing..."

"...but, after all, if they will try the plan of laying by a 'nest egg' or, in other words, a small sum of money, at interest or judiciously invested in land, they will be surprised at the pleasure to be derived from constantly adding to their little 'pile' as well as from all the economical habits which are engendered by this course."

What the author is trying to say is: If you choose financial independence over irrational expending, you will feel more satisfied at the end of the road. The financial is nest egg is a source of great comfort and peace of mind for the contemporary family.

"The old suit of clothes, and the old bonnet and dress, will answer for another season; the Croton or spring water taste better than champagne; a cold bath and a brisk walk will prove more exhilarating than a ride in the finest coach; a social chat, an evening's reading in the family circle, or an hour's play of 'hunt the slipper' and 'blind man's buff' will be far more pleasant than a fifty or five hundred dollar party when the reflection on the difference in cost is indulged in by those who begin to know the pleasures of saving."

With today's gas prices, taking the family for a ride is gradually becoming a luxury.

"Thousands of men are kept poor, and tens of thousands are made so after they have acquired quite sufficient to support them well through life, in consequence of laying their plans of living on too broad a platform. Some families expend twenty thousand dollars per annum, and some much more, and would scarcely know how to live on less, while others secure more solid enjoyment frequently on a twentieth part of that amount. Prosperity is a more severe ordeal than adversity, especially sudden prosperity. 'Easy come, easy go,' is an old and true proverb..."

Well... If you are used to a certain level expenditure, is difficult to cutback immediately.

"A spirit of pride and vanity, when permitted to have full sway, is the undying canker worm which gnaws the very vitals of a man's worldly possessions, let them be small or great, hundreds, or millions. Many persons, as they begin to prosper, immediately expand their ideas and commence expending for luxuries, until in a short time their expenses swallow up their income, and they become ruined in their ridiculous attempts to keep up appearances, and make a sensation."

All those credit offers in the mail are very tempting, they bring instant gratification.

"I know a gentleman of fortune who says, that when he first began to prosper, his wife would have a new and elegant sofa. When the sofa reached the house, it was found necessary to get chairs to match; then side-boards, carpets and tables with them, and so on through the entire stock of furniture; when at last it was found that the house itself was quite too small and old-fashioned for the furniture, and a new one was built to correspond with the new purchases..."

Home renovation shows on TV influence the purchasing habits of home owners. A pretty looking home helps increase the real estate value.

"... ten years ago, we lived with much more real comfort, because with much less care, on as many hundreds. The truth is, he continued, that sofa would have brought me to inevitable bankruptcy, had not a most unexampled title to prosperity kept me above it, and had I not checked the natural desire to cut a dash."

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Good health makes you a winner

The author tries to equate good health with wealth and the connection to addictions. I personally do not agree, but his arguments are very persuasive.

"The foundation of success in life is good health: that is the bedrock of fortune; it is also the basis of happiness. A person cannot accumulate a fortune very well when he is sick. He has no ambition; no motivation; no energy..."

"...Of course, there are those who have bad health and cannot help it: you cannot expect that such persons can accumulate wealth, but there are a great many in poor health who need not be so. If, then, good health is the underpinning of success and happiness in life, how important it is that we should study the laws of health, which is but another expression for the laws of nature!..."

"...The nearer we keep to the laws of nature, the nearer we are to good health, and yet how many persons there are who pay no attention to natural laws, but absolutely transgress them, even against their own natural inclination. We ought to know that the 'sin of ignorance' is never winked at in regard to the violation of nature's laws; their infraction always brings the penalty..."

"...A child may thrust its finger into the flames without knowing it will burn, and so suffers, repentance, even, will not stop the smart..."

"...Many of our ancestors knew very little about the principle of ventilation. They did not know much about oxygen, whatever other 'gin' they might have been acquainted with; and consequently they built their houses with little seven-by-nine feet bedrooms, and these good old pious Puritans would lock themselves up in one of these cells, say their prayers and go to bed..."

"...In the morning they would devoutly return thanks for the 'preservation of their lives,' during the night, and nobody had better reason to be thankful. Probably some big crack in the window, or in the door, let in a little fresh air, and thus saved them...."

"...Many persons knowingly violate the laws of nature against their better impulses, for the sake of fashion. For instance, there is one thing that nothing living except a vile worm ever naturally loved, and that is tobacco...yet how many persons there are who deliberately train an unnatural appetite, and overcome this implanted aversion for tobacco, to such a degree that they get to love it..."

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