You might know Mark Cuban as the former owner of the Dallas Mavericks NBA basketball team, but he’s also a brilliant businessman worth over $6.2 billion as of 2024.
Years ago, Cuban published a short video of his nine rules for getting rich. I agree with many of them, but two of his rules are flat-out wrong. And several others demand a little context.
What are Cuban’s rules for getting rich, and which two are wrong?
Rule #1: Live Like a Student
This is a rigid rule, especially after living several years literally as a student.
After high school or college graduation, it’s only natural to start enjoying the fruits of your labor. You’re making money now by working a full-time job, and you want to spend some of it on things that make you happy.
There’s nothing wrong with that, but it can get out of hand quickly. Living like a student, while not fun, will help you build wealth and achieve financial freedom very quickly. In general, I like this rule, though it will take discipline to get it right for your life.
Balance is key.
Rule #2: You Shouldn’t Use Credit Cards
Cuban argues that you’ll never pay credit card fees if you never use credit cards. And while true, I wholeheartedly disagree with this rule.
But, here’s the catch: You need to be diligent about paying off your credit cards at the end of the month, without exception. If you are in the habit of running a balance, then Cuban’s right.
You shouldn’t use credit cards.
However, credit cards offer a wealth of benefits for responsible buyers. For instance, credit cards include built-in fraud protection. If someone steals your cash, you’re out of luck. But if someone steals your credit card, you can generally get your money back if they used your card to buy something.
In addition, many credit cards offer rewards points or cashback, which is literally free money (again, this assumes you never pay credit card interest by running a balance). And, some cards warranty the electronics you buy with the card, making that “extended warranty” that big-box electronics stores want you to purchase unnecessary.
Responsible use of credit cards also helps to build your credit.
Rule #3: Save Six Months of Income
A 6-month emergency fund is critical. An emergency fund is money set aside for unexpected emergency expenses, such as a leaking roof, a car accident, or sudden medical bills.
Most personal finance experts recommend three to six months of money put aside in a safe place (such as a savings or money market account), but I always recommend six months. The more money you have saved up for an emergency, the better protected you are from incurring debt or selling stocks to fund something unexpected.
Rule #4: Put Savings Into Spx Mutual Fund
Cuban recommends putting your emergency savings into an SPX Mutual Fund. SPX funds are S&P funds that are diversified and relatively safe.
However, I disagree with this rule.
As with any type of investment, there’s still the risk of that money going down. I recommend keeping your emergency savings in something completely safe such as an FDIC-insured savings account. But, an SPX mutual fund may be a good option for those who are more risk-tolerant.
Rule #5: Invest up to 10% Of Savings in High-risk Investments
For me, 10% is way too high of a percentage for higher-risk investments such as Bitcoin (and other cryptocurrencies), Initial Public Offerings (IPOs), and REITs (Real Estate Investment Trusts). However, the amount of money you invest in high-risk investments will heavily depend on your risk tolerance. If you’re more tolerant of risk, you might invest more.
My philosophy allows for about 5% of savings invested in something high-risk.
Rule #6: Buy Consumables in Bulk and on Sale
When something that you use all the time goes on sale (for instance, bath soap, coffee, toothpaste, etc.), buy as much of it as you can. Why? Because you’ll wind up using it eventually, and in the end, you’ll save money because you bought it when it was on sale.
In addition, make it a point to buy your staple foods in bulk at stores like Costco. Your staple foods are things that you use in a wide variety of meals, including rice, pasta, potatoes, wheat, eggs, cheese, dried legumes, etc.
Rule #7: Negotiate Using Cash
Cash talks. Cuban recommends negotiating for a lower price by using cash. This can work for almost anything, including goods and services. I once bought a truck for nearly 20% off the asking price using a cash offer during negotiations.
When using cash, the person or merchant isn’t required to pay credit card processing fees. They also get their money right away. The transaction is also “off the books,” which may entice some service providers.
Rule #8: Read Books
Reading is crucial to stimulate the mind. Cuban used a nonfiction investment book as an example, but I would also encourage you to read fiction.
In fact, I get more out of fiction than I do nonfiction because fiction stimulates my mind in a very creative way. With fiction, the reader follows a story. We mentally predict what we think will happen based on what we know of the author and characters. It’s a great mind exercise.
And fiction teaches us about the human condition. How people interact with other people, and this knowledge can help us succeed in virtually every facet of life.
Rule #9: “Nice Works”
“When you’re nice to people around you, you’ll always get more results,” Cuban said. And, he couldn’t be more right. Other people want to associate with those who are friendly people.
The phrase “Nice guys finish last” is nonsense. Nice people finish first.