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In 1926, George Samuel Clason published a series of parables that was set in the ancient city of Babylon. These parables became known as a book called The Richest Man In Babylon, and it has become a classic in financial literature. If you’ve never read the book, you’ll be blown away by the tried and tested lessons it presents for accumulating wealth and riches.
The story begins with a character called Bansir who was a chariot builder, and Kobbi who was a musician. The two had become the best at their craft but yet were poor and had no money. So they went out to seek the advice and wisdom of their childhood friend Arkad, who in contrast had grown very rich and amassed large fortunes.
Arkad was the richest man in Babylon, and despite spending liberally and giving generously to charity, he seemed to have an endless amount of gold and his wealth kept growing. So Arkad told his two friends a story, he said he was once a poor man too, a poor scribe actually who made a deal with a rich man to find out the secret to wealth accumulation in exchange for his work on a clay inscription. The rich man agreed, and gave him a very valuable lesson, he said “I found the road to wealth when I decided that a part of all I earned was mine to keep and so will you” this is a very powerful lesson and it’s the premise upon which every rich person has built their wealth.
Arkad, the richest man in Babylon, didn’t make his fortune by spending more money than he could afford. He became rich by setting aside 1/10 or 10% of his earnings, and invested it in ways that were sure to produce more income.
This is the first law of gold, to put 10% of your income aside for investing.
The book says “Gold comes gladly and an increasing quantity to any man who will put aside not less than 1/10 of his earnings to create an estate for his future and that of his family”. This law ties into the principle of paying yourself first. Rich people understand this very well. Paying yourself first is a proactive approach to financial freedom. A lot of people constantly complain about how little money they have, they’ll always say, no matter what I do I always have nothing left at the end of the month, or they’ll say something along the lines of my job isn’t paying me enough. Although these points are valid, if one actually assesses where their money is going, they’ll realize that most of the so-called “priorities” such as weekly dinners out, or going out every week are actually not necessary expenditures after all and are in fact a huge toll on your income statement.
So what you should do instead is put 10% aside every month, the moment you receive your paycheck before you pay the bills, rent, utilities, your mortgage, Netflix, make sure you’ve set aside 10%. The sooner you get started the better off you may be, and the larger your savings and investment funds will get. Not only will you take advantage of compounding growth to help grow your money faster, but should a major financial crisis occur such as a huge medical bill, a large car repair, or in a worst-case scenario a layoff, you won’t be as scared.
The second law of gold is to invest your money.
The book says “Gold laboureth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.” Gold and money indeed is a willing worker. The richest man in Babylon learned early on how money works and how to put his money to work for himself. He was able to control his expenses and learn the difference between necessities and luxuries. A lot of people struggle differentiating the two, the rule of thumb when it comes to luxuries is simple, if you don’t need it don’t buy it! it really is that simple.
As your savings increase, you can start looking for profitable safe investments to put your money into. There are many ways you can invest your money such as real estate, stocks, bonds, businesses, and so on. You should see your money as little soldiers going into war and bringing back bounty, the more soldiers you have, the more bounty and loot they’ll bring back. But before making any major investment, you must first be absolutely certain about where you’re putting your money. Make sound investments and your money will come back in abundance, which brings me to the third law of gold.
Seek first advice or as I like to say, seek wisdom first before making an investment.
The book says “Gold clingeth to the protection of the owner who invested under the advice of men wise in its handling.” Look, you worked hard for your money right, and you shouldn’t lose even a single penny, so why would you trust your own inexperience to make sound investments.
This is exactly what a lot of poor and some middle-class people do, they make investments out of their gut feelings, or things they might have overheard from their friends, colleagues, or even on TV or the radio. What always eventually happens is they lose their money, or what they thought was a sound solid investment was actually a scam.
Very rarely would you hear that the investments were successful or that they made any money. The rich on the other hand seek advice from professionals in the handling of money before making any major investment, just like you wouldn’t trust a cook to perform heart surgery on your chest, you should also not trust people who are not skilled in the ways of making and handling money, to advise you on where to put and invest your hard-earned money. This brings me to the fourth law of gold.
“Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar, or which are not approved by those skilled in its keep.”
I think the best way to illustrate this point is with the help of my friend John. So John has been following and practicing the first law of gold for one year now, and has so far saved up a considerable amount of money, a total of ten thousand dollars. So, my friend John is a reasonably smart guy, he reads a couple books a year, and watches TV and YouTube videos on his favorite subject, investing and making money. Although like I said, John is a smart guy, he has a very acute flaw in investing, let’s call it his Achilles heel. These are the kind of investments John and a lot of poor people subscribe to. The moment they hear a “good investment” on TV or radio, they jump on it right away, you’ve heard it all before, this is one real estate opportunity you can’t afford to miss, or invest in this stock it’s too big to fail, two months later guess what?
The basic rule to follow when investing is very simple, if you don’t understand it don’t invest in it, period! Or seek advice like the third law suggests from wise men in keeping and making money. This is what John should have done, instead of investing in bad stocks and real estate. He should have instead looked for and sought the advice of a person who is succeeding and making money in real estate or stock investing. So now my friend John is broke, and has about five hundred dollars left in the bank, but not all hope is lost. In his moment of misery, he conjures up a brilliant plan to make back the money he lost and then some, his plan is simple, brilliant, and cunning, in his eyes it can’t fail. John plans to go to Vegas, yeah the gambling city, bet on a couple of games and make back the money he lost. He’s absolutely sure and certain that he can make back the money and then some, which brings me to the fifth law of gold.
“Gold flees the man who would force it to impossible earnings, or who follows the alluring advice of tricksters and schemers, or who trusts it to his own inexperienced and romantic desires in investment.”
You see, in John’s attempt to make back the money he lost, he thought the fastest and easiest way to make back the money was to gamble, although very rarely some people do make a lot of money gambling, it wasn’t John’s lucky day. My friend John learned two very important lessons that year. One, what happens in Vegas stays in Vegas. And two, there’s no quick way to become rich. The lessons that Arkad taught his friends are the premise of the book, and they are the lessons of wealth building habits that I believe every rich person has followed to accumulate their wealth. These lessons have helped millions of people, who practice them to become financially stable and wealthy, and I believe these lessons will help you build a firm financial foundation.