The 5 Laws of Gold
Unlike what the title implies, the 5 laws of gold are actually tips for increasing your wealth. They are extracted from the book “The Richest Man in Babylon” by George S. Clason. This was initially published in 1926 and has been in print ever since.
The book is structured to entice the reader with its wise yet practical advice. It is set in the city of Babylon and features the teachings of Arkad. The book uses parables to tell the stories of different characters. The main character is Arkad, the richest man in Babylon.
The different tales take the reader to Babylon, and each story tells the story of a specific character and teaches the reader a law of gold as a moral.
From a disgruntled chariot builder to the success stories of wealthy men, each piece leaves us with knowledge.
The parables tell the reader how to fatten their wallets, pay all their liabilities, let their gold earn more for them, let others borrow from them if needed, but protect their money from loss and cheaters.
What The 5 Laws of Gold Teaches Us
Lots of people earn millions, and yet, they can end up broke. Be it a showbiz personality or a celebrity athlete, they can lose their fortune.
You don't start being wealthy with an account full of cash. Wealth starts to build up with the appropriate frame of mind. Save a fixed portion of your earnings, and make it a point to invest as early and as often as possible.
Applying these five laws of gold is not exclusively for millionaires, though. Ordinary people can also apply them successfully. So let us dive into what the laws have to say. The lines in bold are the actual laws from the book.
The 5 Laws of Gold: # 1 Gold Loves Those Who Save 10%
“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.”
This statement implies that the greater your earnings, the more you should be able to save. 10% of $5000 is more than 10% of $4000. Another way to look at the law is that the more you earn, the more you will have to spare for savings.
It makes sense if we use the generic 50, 30, 20 rule, with 50% for living expenses, 30% for emergencies, and 20% for savings. As your paycheck grows, you should have more money to set aside for saving.
The 5 Laws of Gold: # 2 Gold Likes to Multiply
“Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of field.”
Please note that profitable employment here is not about lavish spending on things that will not help increase your investments.
You need to invest in things that will yield returns in the long run. For instance, very few people need 10-bedroom houses and $20 million estates unless they earn (and save) enough to make that look like pocket change.
The key to multiplying wealth is to be careful with your expenses and live within your means. As a matter of practice, you should live as far below your means as possible in order to invest all your saved income.
Even then, if such people invest in such expensive real estate, they should be very sure about the appreciation and potential market for such expensive investments.
The 5 Laws of Gold: # 3 Gold Loves a Cautious Owner
“Gold clingeth to the protection of the cautious owner who invests under the advice of men wise in its handling.”
A good rule of thumb when managing money to increase wealth is to save a fixed portion of your pay check every month, no matter what the size of your salary is.
One of the most certain ways to grow your wealth is to invest it some place reliable. While investing has its own set of risks, there are a variety of options that can be explored. You can opt for a low hassle and low
Beginner investors can opt for low involvement automated investment services like a robo advisor run investment service.
You can opt to get investment (and wealth management) advice from a broker or invest in physical assets like commodities and real estate, which are other standard options after the stock market.
Some millionaires are in the news for trusting fraudulent investment advisors and wealth managers. However, many get their wealth managed capably and safely by wealth managers.
The trick to safety is not to hand over complete charge of your money and instead keep an oversight over where your money is going and why it is going there.
Experts can usually be trusted, but it is good advice not to hand over complete control.
The 5 Laws of Gold: # 4 Gold Favours Those Who Study Investments
“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.”
A doctor will probably not be able to run a hotel well. Similarly, a restauranteur will not know anything about managing a hotel. This means that you should not dabble in areas where you lack skills or industry knowledge.
A trader would invest in commodities or foreign exchange, an engineer in a consulting business, or a chef in a restaurant. If you are investing in a business you are new to, it is better to take counsel from experts.
If an industry expert is telling you not to do something, at least ask for more information and see if it makes sense.
The 5 Laws of Gold: #5 Gold and Get-Rich-Quick Schemes Don't Mix
“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.”
Like gold law # 4 above, listen to multiple advisors and see what they have to say (and offer). However, if someone makes an offer or suggestion that is too good to be true, the chances are that it is.
Returns on investments that are far greater than average are usually not realistic and likely to blow up with all the money you invested in them.
It doesn't necessarily have to happen immediately, but eventually, for example a two or three year time frame, the scheme can collapse and take all your capital with it.
Conclusion to The 5 Laws of Gold:
Putting aside the origins of the laws (from a book published in 1926) and the laws offer sage advice on how to manage our finances and save well. It has valuable tips for people who have trouble managing their money, trusting others too much, or poor saving habits.
The laws can be used as mantras, and if applied well, they can be a life changing force for your money and yourself.
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