The Principles of Money
Bob and Tag explain the Five Laws of Gold as described in the book, The Richest Man in Babylon.
Almost 4000 years ago in ancient Babylon, the first glimmers of financial advice began being recorded on tablets and similar scriptures for future generations. Archaeologist George S. Clason began to collate this age-old advice into readable pamphlets.
Eventually, he condensed all the financial advice into a book published in 1926 called The Richest Man in Babylon. The ideas in this book are widely accepted and remain popular even today.
Here, we dive into some of the parables from the book.
The Five Laws of Gold
The Five Laws of Gold talks about how to protect your money and invest them for future gains. Here we make sense of each law and explain them.
1) Pay Yourself First Always
Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family
The general idea behind this law is that you keep aside some money for your savings. It teaches us the importance of maintaining savings and the need to pay yourself first.
But what do you mean by paying yourself first?
We all have expenses. We have electricity and water bills that we pay to the government, the rent paid to our landlords, and similar expenses where we owe money to other people periodically.
So, this means that you use that money earned through salary or other incomes only to pay others.
Now, this law says: before you spend money paying other people, pay yourself first. And how would you do that?
You would do that by setting aside a percentage of your income for savings and investment. Remember that this will be money that you earn only for yourself and your loved ones.
2) Money Attracts More Money
Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.
Once you start the process of keeping money aside for your future, you will gain confidence in money matters. With the financial stability that you get from having a backup, you will be able to think of ways to earn and save even more money.
And this is why money attracts more money.
Essentially, this law says that you must have good capital saved to find more ways to increase that capital. Soon, it gets easier to root out better, more efficient ways to compound your money.
Therefore, if you save and put your money to good use, it will steadily begin to work for you and give you profits in the long run.
3) Money Clings to The Wise
Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.
It is necessary to make robust investment choices. And one of the best ways to make good choices is to conscientiously listen to financial advice from those who have a good handle on money.
They have the knowledge and experience to help you understand what can work for you and what will not. And by passing on their learnings to you, it is natural that you too become wiser with finances.
Their wisdom with your patience will reward you in the long run.
4) Unfamiliar Ventures Erode Your Wealth
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.
This law encourages investors involved in any investment to be familiar with the venture. These ventures could be stocks, mutual funds, real estate, or anything of that kind. It only asks that you collate enough knowledge about the investment type before diving into it.
When you are unfamiliar with the investment you are involved in and continue to remain ignorant about it, you will likely eat away at your wealth and suffer more losses than gains.
The same holds if you practice an investment that better investors do their utmost to avoid.
5) Unrealistic Expectations Deteriorate Your Wealth
Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment
This law asks you to have achievable goals for your financial stability. It is not wise to expect your investments to give you returns that are never possible. And it is even worse to believe a non-expert who would promise you unrealistic returns.
When you have impractical expectations for your money and discard financial sense, money will continually slip away. You might not even understand how or why it slips away the way it does.
Therefore, it is best to have attainable financial goals and accumulate enough financial sense to make good choices to grow your wealth.
The Five Laws of Gold are from the book, The Richest Man in Babylon by George S. Clason.
Written by Tag | Edited by Bob