'Shark Tank' Investors: 6 Business Rules That Also Apply to Your Wallet
Behave more like a financial engine: A business.
The same business lessons preached by the investors on "Shark Tank" can apply to your personal finances, from making firm money goals to evaluating risk and opportunity. And the experts from the show have much to share, as well.
Learn More: Mark Cuban's 2 Simple Wealth-Building Rules Almost Anyone Can Follow
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Incorporate these business rules into your personal finances, and watch your wealth grow exponentially faster.
1. Know Your Numbers
Kevin O’Leary put it succinctly in a YouTube short: “You can’t measure the business without the numbers.”
The same goes for your personal finances. What percentage of your income goes to fixed structural expenses like housing and transportation, including irregular expenses like repairs and maintenance? What do you spend on discretionary expenses like subscriptions, entertainment, travel, delivery and restaurant meals?
What’s your savings rate? What’s your net worth? What’s your target nest egg and financial independence date?
In business, they say that which gets measured gets done. Measure your financial progress accordingly.
2. Cash Flow Is King
Cash flow is the lifeblood of your business — and your personal finances. If you come up short one month, you might survive by tapping emergency savings or credit. If you come up short regularly, your finances will collapse.
“On Shark Tank, a business can have impressive sales and still fail if it does not manage cash flow properly,” notes finance and bankruptcy attorney Ashley Morgan. “A good budget needs room for real life, not just ideal months where everything goes perfectly.”
3. Keep Reserves and Liquidity
Likewise, you need an emergency cash reserve to cushion you from irregular but inevitable shocks.
“Life happens, and you need to be prepared to handle unexpected situations,” Morgan added. “Cars break down, jobs change, medical expenses arise, and unexpected costs show up.”
Beyond an emergency fund, add additional lifelines that you can tap in a crisis. Keep an unused credit card that you can access in an emergency. Have some money in relatively stable stocks or bonds that you can sell if you must.
4. Evaluate ROI and Risk
Mark Cuban famously repeats on Shark Tank that, “Making money is easy. Keeping money is harder.”
Shark Tank investors look at businesses through the lens of return on investment (ROI) and risk. You should do the same with all of your own investments and major purchases.
That includes diversifying them to include not just a few individual stocks, but broad market funds. To hold not just U.S. stocks, but international stocks. And of course to go beyond stocks to own bonds and passive real estate investments and perhaps even a little precious metal.
5. Understand Opportunity Cost
The money you commit to major purchases like a home or car is money you can’t invest to grow your wealth. The more you spend on looking and feeling rich, the less true wealth you’ll build.
“Many consumers mistakenly view buying a car or house as an investment, but cars are depreciating assets and even homes appreciate much slower than true investments,” explains Elisabella Ricca, consumer analyst at TopCashback USA. “On the other hand, investing in education, professional development or appreciating assets creates a real return.”
6. Follow a Long-Term System
Shark Lori Greiner put it simply on Instagram: “Real success comes from thinking long-term. Stay consistent, stay patient, and the results will follow.”
People, like businesses, don’t become fabulously successful overnight. They build momentum over time by continuing to do the right things day-in and day-out, month-in and month-out.
That includes saving and investing a high percentage of their income, automatically, avoiding lifestyle inflation, and diversifying and rebalancing their investments, to systematically buy low and sell high.
Create the system so that you stop making emotional decisions. If you have to stop using credit cards and buying with cash or debit only, so be it. If you have to invest on autopilot with a robo-advisor so you stop following day-to-day stock gyrations, do it.
Thoughtfully created systems will save you when your willpower runs dry.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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