Financial literacy is a really important skill to develop if you want to escape the rat race, build your wealth faster and run your own business.  By financial literacy, I mean the skills to balance a budget, produce more than you consume and invest proactively in your future.

Today, the problem is that in most consumer-oriented societies the majority of citizens are basically financially illiterate because of a lack of education on the subject and the constant reinforcement of advertising telling them to buy all these things they don’t really need.

Recent studies have shown that in Canada and the United States 60% of people live paycheck to paycheck. The entire structure of our economy is now built upon a shaky foundation of ever increasing debt where everyone is encourage to max out their credit cards, live beyond their means and take on dangerous levels of debt. It’s not just regular people that can’t balance a budget, our government can’t do it either.

Contrary to the popular illusion pushed by television and advertising, most wealthy people with a million dollars of assets don’t flaunt their money, live in massive houses or drive really expensive cars. Many of them have never earned six figure salaries. What they did differently then most people was they saved at least 15-20% of their income and then wisely invested these savings to create long-term wealth.

It’s not how much you make, it’s how much you keep and how you decide to invest it. With that in mind, here are 10 useful guidelines for financial literacy that will help ensure your economic prosperity and lifelong success with money:

#1: As long as you don’t worry about money, you’ll always have enough.

Money represents different things to different people. Some desire it for status, some for security and others want it because they believe it would allow them to live their dream lifestyle. But the irony is that the people who constantly worry about money and think they need it to be fulfilled usually aren’t the ones who end up getting very much of it.

People worry about money and feel they are poor because they are always being told by advertising that they need more possessions to be happy. But let’s put things in proper perspective. If you live in a privileged country like Canada, Germany or the United States and you make more than $35,000 US you are in the global one percent of income earners.

#2: Wealth is relative and when you pursue money the bar is constantly raised.

I have a friend who set a goal of making $80,000 a year and then he said he would enjoy life. Five years after graduation, he achieved his goal but instead of kicking back he realized that $80,000 wasn’t enough so he’s still slaving away doing 60-hour week at a job he hatesThe only thing that has changed is he drives a nicer car and has a bigger mortgage but at this rate freedom may have to wait until retirement, or never.

Our cultural obsession with being rich leads even billionaires to measure themselves against even richer people and not be able to properly enjoy their money. Yet, I know lots of people who enjoy life and live comfortably on a modest income of $45,000 a year. I also know people who make $200,000 or more per year and live paycheck to paycheck.

Studies show that the wealth curve is most stratified among the top 1-2% of income earners (generally people making $200,000+ a year) and the status competition is much more intense among people at the higher parts of the curve. Doctors don’t measure their wealth relative to garbage men, they measure themselves based on what their professional and business owners colleagues are earning.

Basically, the best advice is stop measuring yourself against other people, it’s meaningless and it fosters status anxiety that will destroy your peace of mind. It’s much better to pursue higher values of passion, service and purpose, rather than money.

Rule #3: Live within your means and avoid unnecessary debts.

The reason the rich get richer and the poor get poorer is because rich people lend money and poor people borrow. The wealthy collect interest and the poor pay it. Buy now, pay later. Easy credit is the oldest trick in the book to enslave people and societies. For every person with real liquid assets of a million dollars, there are 10 people mortgaged to their eyeballs and trying desperately to “fake it until they make it”.

The only things worth going into debt for is a house you are going to live in or a broad education that includes creative or technical skills that are in-demand. The days of leveraging yourself with debt and purchasing inflating assets that you can flip to greater fools will end in economic misery for most.

Earn your money the old-fashioned way – by having good ideas, increasing your productivity through self-education, saving 20% of your income, and investing it wisely.

#4: Educate yourself about money or get a good financial planner.

Smart investing takes a lot of research. Talk to people who are wealthy, read books on investing and get advice from people who are knowledgeable about investing or hire a trustworthy financial planner. If understanding stocks and financial markets isn’t your thing then start your own business and invest your money in yourself (but make sure you hire a good accountant).

Don’t take advice from friends and family that don’t have money or financial literacy. Wealthy people look at money through the eyes of opportunity. There is always lots of opportunity if you’re looking for it.

Be aware of the loss aversion bias, which refers to people’s tendency to prefer avoiding losses to acquiring equivalent gains: it’s better to not lose $5 than to find $5. Some studies have suggested that losses are twice as powerful, psychologically, as gains. Look toward what you want as opposed to away from what you don’t want.

Rule #5: Do what you love (while providing value to others) and the money will follow.

I have met a lot of people that will casually admit that they picked their careers entirely based on the earning potential. I think this is really short-sighted because if you aren’t passionate about your job, then you’re not going to feel very passionate about your life.

It’s nice to have a good steady paycheque but the more important thing is to do something that you like and which gives your life meaning and purpose, and allows you to make a difference in other people’s lives.

Also, keep in mind that if you aren’t passionate about your work, then you probably won’t be very good at it. Success today requires constantly learning and upgrading your skills on your own and passion and purpose is essential for self-directed learning. Find the intersection between what you love to do, what people need and what they will actually pay your for doing.

Rule #6: Don’t follow the crowd, unless you like jumping off cliffs.

Legend has it that one day in 1929, Henry Ford was wandering through one of his car factories and he overheard the man sweeping the floor talking about how he had put all his money into the stock market because it was the way to riches. Ford realized that if the floor sweeper, someone who normally wouldn’t be investing in the market, was buying stocks to get rich like everyone else then it was clear sign of a bubble. So he sold his stocks and a few months later the stock market crashed.

If you’re going to invest in stock or a house, don’t take advice from people who drank the economic Kool-Aid and stopped thinking rationally about their investments. Instead, listen to someone like Warren Buffet.

Buffet breaks his entire investment philosophy down into simple terms: when people are greedy, be fearful. When people are fearful, be greedy. That’s the closest you’re going to get to predicting the markets.

Rule #7: Set realistic goals, make a budget and if you can, start your own business.

This is an important thing to do but also one of the hardest thing because planning budgets is so boring. Try out a website like Mint or Personal Capital that makes budgeting fun and easy. If it’s financial stuff is really not your thing, then work hard at what you’re good at so you can hire a good accountant to do it for you.

Once you’ve got your finances under control, then start researching how to start your own business. The entire economies of most developed countries are currently being re-tooled toward rewarding self-employment, encouraging innovation and giving people the resources they need to create their own jobs. This is a huge opportunity for entrepreneurs who can both manage money and execute on their ideas.

Rule #8: Love is more important than money. Don’t let money destroy your relationships.

Studies show that most couples don’t discuss money unless they are arguing. It is important to talk openly about money and work together with your spouse to save money. Incredibly, the biggest cause of divorce is issues with money. Talking openly about money may save your marriage one day.

Avoid lending money to friends and family. It may seem like a good idea at the time but it is usually a terrible idea. If you have children, educate them about money at an early age and make them work for their own money. Handouts create dependency, a sense of entitlement and people only appreciate the things and get long-term value from that which they have earned through their own initiative.

Rule #9: Don’t take financial advice from the mainstream media.

Recent studies have shown that most economic predictions made in the media end up being wrong. The reason why economics is often called the dismal science is because 1) there’s nothing scientific about many economic predictions and 2) it’s almost impossible to predict macroeconomic events (the big stuff). You can observe trends but the markets work in mysterious ways and timing them is nearly impossible.

Usually, it is Black Swan events that few people anticipated that end up causing major changes in the markets. In the United States, very few economic commentators predicted the housing bubble, the collapse of the investment banks or the 2008 financial meltdown. In fact, even a highly-educated Ph.d economist like former Federal Reserve Chairmen Ben Bernanke is wrong nearly every time.

Rule #10: Money is overrated. Be thankful for what you got.

If you’re reading this article on the Internet you likely enjoy a standard of living substantially higher than the vast majority of humanity. In fact, if you live in a house or apartment with the Internet, decent furniture, food in the refrigerator, electricity and heating, you’re doing better than most people in the world.

Admittedly, poverty is something best avoided. Just don’t think that more money is going to magically solve your problems. It won’t. But financial literacy will.