How to effectively manage money: tips from an American billionaire

The American entrepreneur, Shark Tank investor and owner of the Dallas Mavericks basketball team, sold his first startup to CompuServe in 1990 for $6 million. Nine years later, he sold Yahoo for $5,9 million. Since then, Mark Cuban has invested in dozens of other companies. His fortune is now estimated at $4,2 billion. Inc.com compiled 4 of the best entrepreneurial tips on how to effectively manage personal finances.

Photo: Shutterstock

1. Pay off all debts

“The best investment you can make is to pay off your credit cards and pay off the debts you have,” Cuban said in an interview.

For example, if you have a student loan with an interest rate of 7%, then when you pay off the loan, you will immediately receive the same 7%. And such “immediate income,” the entrepreneur says, will be much safer than investing in stocks or trying to purchase real estate at any cost.

Credit card rates are generally much higher, so the sooner you pay off your loans, the more benefits you get.

“Using a credit card is fine as long as you pay it off at the end of the month,” Cuban told Money. “Just recognize that the 18, 20 or 30 percent you pay on credit card debt will cost you a lot more than you could earn anywhere else.”

In the case of debts that cannot be repaid in a short time (for example, a mortgage or student loan), Cuban suggests taking advantage of the opportunity to refinance debt in times of economic hardship and choosing lower interest rates.

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2. Save up money for at least six months

According to Cuban, the "airbag" should include funds that you can live on for at least six months.

“You should try to save six months of money and keep it affordable,” the entrepreneur told Vanity Fair. – In this case, you will not experience serious difficulties if you lose your job or decide to change something in your life.

3. It is possible to make risky investments, but they should make up only 10% of the total volume

Cuban acknowledges that billionaires have made their fortunes in part by taking risks. However, he advises limiting to 10% the amount of investment you intend to devote to a risky venture.

“If you are a real adventurer, you can allocate 10% of your funds and invest it in Bitcoin. But if you do this, it would be better to think that you have already parted with this money forever,” he noted in an interview with Vanity Fair. The entrepreneur advises placing the remaining 90% of the funds you are willing to invest in the cheapest index fund you can find.

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4. Don't pass by discount stores

“Saving 15% on $1 worth of items that you will definitely spend money on is a better return on your money than the 15% per year you would get by investing the same $1,” the entrepreneur recommended in his blog.

Of course, this doesn't mean you should fill your home with only cheap goods from mass stores. However, according to Cuban, the parallels between smart consumption and investing will indeed help in some cases to choose a more appropriate strategy for managing personal finances.

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