Kevin O'Leary Says You Should Always Do These 6 Things With Money

The money rules you see in the news often focus on what to buy now and how to beat the market. But Kevin O'Leary takes a more defensive, rules-based approach that focuses on what people should avoid, protect, and build habits around.

Some of his recommendations can sound conservative, but they are designed to help people avoid surprising financial mistakes with lifelong consequences. These six rules range from savings methods to handling debt. Read on to see which you can apply to your money matters.

Save and invest before you spend

O'Leary's savings rule is well-known: Take "15% of your income when you're in your 20s and invest it in the index of the S&P 500." He considers this investment a simpler method than choosing individual stocks, and it may help you follow his other rules to keep emotions out of investing. When you use a broad index fund, you are less likely to select individual stocks based on fear or short-term trends.

The order of this pay-yourself-first mindset matters most, because savings is considered non-negotiable with discretionary spending built around it. His reasoning is that recurring automated contributions give compounding time to work and reduce the need for a high income, market-beating returns, or deep stock-market knowledge.

Pay off high-interest debt

O'Leary never says you can't borrow, but he does say that "debt is evil." He also wants people to "be out of debt by the time you're 45."

His reasoning is that you can work harder in your younger years, and many of the things you need in life (homes, college, cars) may be financed to start. But by your 40s, he says you should aim to move from owing money to owning assets that can work for you.

At any point in life, paying down expensive debt may create more breathing room in a monthly budget and prevent interest charges from draining money that could otherwise be saved or invested.

Don't let one stock or sector dominate

O'Leary has said to invest "no more than 5% in any one stock, no more than 20% in any one sector" as a way to diversify risk. Concentration can magnify losses and gains. So, while it may boost your earnings during the good times, a single company collapse or poor sector performance can wipe out your gains.

An example would be not having more than 5% in a single chip maker stock, and no more than 20% in tech. Or no more than 5% in one pharma company, and no more than 20% in health care.

Stay liquid

Paying down high-interest debt can improve monthly cash flow after the debt is repaid. However, using available cash to pay debt down can temporarily reduce liquidity, so it is important to balance debt repayment with maintaining an emergency reserve. This fits with O'Leary's advice to have cash or easily accessible assets available for expenses, emergencies, or opportunities.

His exact words were "Liquidity matters, always. If you can't access your capital, that's risk." And while not directed at retirees specifically, this rule can be especially important as you approach or enter retirement because there may be less flexibility to wait for a portfolio decline to recover before covering living costs.

Protect your principal and live on cash flow

Principal is the money you originally invest, and it doesn't include interest, dividends, rent, or other investment income. O'Leary's philosophy is that income from an investment should be used for spending when possible instead of routinely selling the underlying assets or principal to fund your lifestyle.

His exact words are "Spend the interest, never the principal," as he wants the original investment to continue earning and growing for you throughout your lifetime. 

However, this is positioned as general advice, and many retirees will need a blended withdrawal strategy that may include selling assets, drawing Social Security benefits, receiving pension income, or using other income sources. This isn't a universal rule for every stage of life.

Favor investments that pay you

O'Leary has frequently said, "never own an investment that doesn't pay you." By pay, he likely means dividends from stocks, interest from bonds or cash instruments, or rental income from real estate. Not every growth investment produces income today, but this is the framework he favors.

Are there investments that don't pay you? Yes, and they include assets that can increase in value but not pay you back as they grow. Gold or fine art can fit into this category, even if O'Leary hasn't specifically called them out.

Also, because roughly 20% of S&P 500 companies do not pay dividends — and O'Leary has endorsed investing in S&P 500 index funds — this advice can appear to conflict with his broader investment philosophy.

Bottom line

O'Leary's habits are not as much about finding the next big payoff as building small habits and taking on less risk. Basically, high-interest debt can set you back, while consistently saving in a high-yield cash account, retirement account, or diversified S&P 500 fund can help build real wealth over time. He also wants you to stay as liquid as possible, so you can get to your money when you need it.

His advice seems simple on the surface, but how it all comes together will differ from person to person. For a truly personal plan, consider getting help from a financial professional.

You May Also Like

23 Ways To Get Money Without Getting A Second Job

By FinanceBuzz Editors

How To Save Money on Car Insurance: 12 Ways to Lower Rates

By Elyssa Kirkham

10 Things Seniors Born Between 1941-1969 Could Take Advantage Of

By FinanceBuzz Editors

19 Dumbest Things Smart People Waste Money On

By Team FBZ

7 Moves If You Want to Stop Living Paycheck to Paycheck

By FinanceBuzz Editors

7 Clever Ways to Crush Your Debt

By FinanceBuzz Editors

Up To 5% Cash Back

Discover it^® Cash Back

Benefits Card Details

• Intro APR on purchases and balance transfers
• $0 annual fee
• Apply Now

• INTRO OFFER: Receive a $200 statement credit when you spend $500 on purchases in your first 3 months of account opening
• UNLIMITED CASHBACK MATCH: Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300. Click Apply Now to view important rates and disclosures
• Earn 5% cash back on everyday purchases at different places you shop each quarter, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases
• Redeem cash back for any amount. Every $1 you earn in cash back is $1 you can redeem
• Rewards don't expire for the life of the account
• No annual fee and no foreign transaction fee
• Lock your card in the Mobile app if it’s misplaced, lost, or stolen
• You're covered by $0 Fraud Liability for unauthorized charges

4.7

FinanceBuzz writers and editors score cards based on a number of objective features as well as our expert editorial assessment. Our partners do not influence how we rate products.

Apply Now

on Issuer's secure website

Rates and fees

Read Card Review

Intro Offer

UNLIMITED CASHBACK MATCH: Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300. Click Apply Now to view important rates and disclosures. Plus, receive a $200 statement credit when you spend $500 on purchases in your first 3 months of account opening

Annual Fee

$0

+ -

Why we like it

• The Discover it^® Cash Back is ideal for anyone who loves flexible rewards options.

• Cardholders can redeem their cash back for any amount.

• Earn 5% cash back on rotating bonus categories up to the quarterly maximum when you activate, along with 1% cash back on all purchases.

• Apply Now

---

Subscribe Today

Learn how to make an extra $200

Get vetted side hustles and proven ways to earn extra cash sent to your inbox.

or

Subscribe Now →

By submitting this form you agree to receive emails from FinanceBuzz and to the privacy policy and terms