Elon Musk’s Rules for Personal Finance

It is safe to say that Elon Musk is not your average person. The multibillionaire, serial founder of companies, and would-be colonizer of Mars cuts a polarizing figure. While his personal finances are above and beyond what any of us can expect to earn in our lifetimes, there are still a number of lessons that we can take from him. If his behavior is a guide, here are some rules for personal finance that we can glean from his Elon Musk’s example.

Musk is a corporate daredevil, with a tolerance for risk that matches his outsized personality. While his lifestyle of choice is not right for us all, his path offers us some ideas that we can apply to our own personal finance journeys.

Follow Your Vision

In some ways, the biggest personal finance lesson we can take from Musk is the singular importance of aligning your vision with your financial decisions.

Musk decided early on in his life that he wanted to make grand changes for humanity. He has revolutionized multiple fields and disciplines, such as online payments, electric vehicles, and space travel by both working hard and investing his own capital.

While the entrepreneur clearly has a unique ability to identify commercial opportunities, he has succeeded in aligning his financial and professional goals. In other words, his personal finance decisions are consistent with the life he seeks to lead.

For instance, following his first exit, the 27-year old Musk plowed the majority of the millions he netted from selling Zip2 (a software which created yellow pages and maps for newspapers) into X.com, which became the precursor to the online payments provider PayPal.

For many, earning a windfall at such a young age might produce a more conservative approach, as they would seek to safeguard their newfound wealth through a diversified portfolio of investments. Not Musk, who immediately began devoting both his energy and resources into the next challenge.

“That’s part of what separates Elon from mere mortals,” says Ed Ho, who worked with Musk at Zip2 and co-founded X.com, as quoted by the author Ashlee Vance in his bestselling biography Elon Musk. Ho continues that bold moves like investing such a large portion of personal capital in yet another venture “either pays off or you end up in a bus shelter somewhere.”

Just like Musk, you also want to make sure that your financial decisions are supporting the life you seek to lead. While these will likely be more modest in nature, it will still benefit you to create a budget to ensure that your goals–such as buying a house, saving for retirement, or going on a dream vacation–are aligned with your financial choices.

Hard Work and Sacrifice

Another personal finance lesson to take from Musk: the importance of hard work and sacrifice.

Musk’s work schedule is intense, to say the least. He oversees multiple companies in different cities, jetting to-and-fro at abandon.

“The life that Musk has created to manage all of these endeavors is preposterous,” writes Vance in his book. What would be a recipe for burnout for most seems to invigorate Musk, whose extreme work ethic became apparent at a young age when he read two sets of encyclopedias while still in grade school.

In addition to his seemingly unending stores of energy for work, Musk has also shown his ability to sacrifice and do without. He has boasted of his ability to live a frugal lifestyle, even subsisting on $1 a day while a student.

While hopefully you won’t find yourself needed to live such a thrifty existence, it is always a good idea to try and save money when you can by cutting out non-essential items. There are plenty of ways to save money, be it brewing your own coffee or bargain hunting for groceries, which can help increase the funds you have for long-term goals down the road.

Take a Long View of Your Goals

Lastly, personal finance is a lifelong journey. Like Musk, you can and should take a long-term view of your objectives.

Musk has stated some outlandish goals, including seeking to place human colonies on Mars. Looking to the stars is the definition of an ambitious vision, one that requires a long-term outlook to pursue.

When it comes to SpaceX, for instance, there have been numerous failures along the way. However, what might have persuaded a less-committed individual to abandon his efforts did not cause Musk to veer off course.

After the first SpaceX rocket, the Falcon 1, crashed mere seconds into its maiden flight, Musk wrote a postmortem about the failed attempt. As detailed in Vance’s book, Musk closed his note by writing: “SpaceX is in this for the long haul and, come hell or high water, we are going to make this work.”

While your personal goals do not need to be as adventurous as space travel, you can and should be just as committed to fulfilling them. Worthwhile goals can take years to reach, and it can be easy to let frustrating setbacks along the way cause you to abandon your dreams.

Perseverance is an incredible trait, one that will serve you well regardless of your chosen path. The same can be said for investments. The best ones are those we hold onto for long horizons, when the power of compound interest can work its magic to help you multiply your money many times over.

Conclusion: Design the Life That’s Right for You

There is no one right way to live, and Musk’s choices are certainly more extreme than most. Still, he has designed the contours of the life he wanted, which he then ruthlessly pursued.

Musk aligned his finances with his dreams, worked hard and saved when he needed to, and stuck to his long-term vision. These lessons are all applicable to your personal finances, whatever they might happen to be.

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