Let’s talk about the five laws of gold. Number one, it’s shiny. Number two, it makes nice jewelry. No, no, I’m just kidding, this article has nothing to do with gold or gold prices. This article is all about the five golden rules of money.
Back in the 1920s, George Clason published a series of pamphlets containing personal finance advice, which were later compiled into the book known as The Richest Man in Babylon, which is essentially the Bible of personal finance.
This book was absolutely revolutionary, and if you haven’t read it, you absolutely should. But if you hate reading, don’t worry, I’m going to explain the five laws of gold from The Richest Man in Babylon right now. These are the five laws of gold, the only rules you need to get rich! Let’s go!
Just to preface this, these rules were written in the 1920s, and I guess the guy who wrote them was feeling a little Shakespearean. So, if you have no idea what the hell is happening when you read each law, keep reading, because I’ll explain it to you like a normal 21st-century human being afterwards.
Law #1 – The Importance of Saving
“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 first law is perhaps the most important of them all, and it basically means that to become wealthy, you have to make a diligent savings plan. Now, The Richest Man in Babylon says that you have to put at least one-tenth of your earnings directly into your savings. And the key phrase there is “at least.”
Really, you should be putting in as much as you can afford to, so you can set up your financial future. So, how do you figure out how much you can afford to put away per month? You create a budget. Figure out how much you need to spend on your monthly expenses like rent, food, utilities, mortgage, car payments, et cetera. Then, from there, you should set a monthly percentage of your earnings that go directly into your savings.
Oh, and by savings, I’m not just talking about your Chase bank savings account. You can keep your savings in a high-yield savings account, an employer retirement account, or an IRA. If you’re a young person watching this, I’d recommend putting your money in a Roth IRA and then investing it in an S&P 500 index fund, which brings us to the next law.
Law #2 – Investing Is a Blessing
“Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.”
This law is basically all about the importance of investing. The difference between rich and poor people is that rich people make their money work for them, while rich people sit on it until it’s time to spend it. Used the right way, money is a tool that should be used to make you more money, and the way to do that is by investing.
And I’m not just talking about your stocks, ETFs, and index funds. You can take that money and fund a startup company that you think has a good chance to be successful, you can look into buying some real estate and watch it appreciate in value, you can even use your money to start your own business! There are plenty of side hustle businesses you can start with just a little bit of extra dough. They might just make you a millionaire one day.
Investing can mean a lot of different things, but one thing stays the same, you should think of every dollar as a little employee that you send out into the field to make more money. And soon, you’ll see it multiply like the flocks of the field. But, if you’re leaving someone else to tend to your flock, you probably want to trust that person, right?
Law #3 – Good and Bad Advice
“Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.”
Law #3 is pretty easy to understand. It’s basically telling you to be careful who you turn to for investment advice. If your cousin who works at Walmart just told you that one particular stock is going to turn you into a millionaire overnight, it’s probably best to exercise a healthy amount of skepticism. Make sure the sources you’re using to find investment advice are reputable.
Look to people who have real merit. Me? I like to look at what guys like Warren Buffet or Mark Cuban are saying. Why? Because they have merit. These are guys that have gotten filthy rich off of their investments. Don’t you think that they kind of know what they’re talking about? If you listen to any Joe Schmo on the street and invest in a stock or a cryptocurrency whenever someone says, “it’s going straight to the moon,” you’re probably going to end up losing money.
Exercise caution before taking any investment advice, research any investment you plan to make heavily, and you’ll probably come out on top. Speaking of research, let’s look at Law #4.
Law #4 – Research and Knowledge
“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.”
Alright, so this law is basically all about knowing your investments inside and out. I seriously can’t stress this enough. You should never invest in anything that you don’t know a ton about. You think solar energy is the future? That’s great, but how sure are you? Have you pored through article after article about the solar energy industry? Do you know how solar energy technology works? Who the biggest players in the space are? Who are the suppliers to those big players? You need to know the ins and outs of an industry before you invest in it.
Same thing goes for an individual business. You should know who the executives of a company are, what their plans for the future are, if those plans make sense in the context of the market, and what stage of the business cycle they’re in, among a bunch of other things, before you decide to invest in them.
Also, you probably shouldn’t invest in any company or person that promises you unrealistic returns.
Law #5 – Beware Schemers
“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.”
Law #5 is basically about the risk-reward relationship or, more accurately, people who throw their money at shady investments because they’re promised huge payoffs. When someone tells you that you’re going to get a billion-dollar return, it’s only to feel a strong sense of excitement. But investing shouldn’t be done with your heart, it should be done with your head.
Just like anything in life, if something seems too good to be true, it probably is. This really relates to the whole crypto landscape these days, in my opinion. There are all these people going around saying that this crypto or that crypto is going to make you filthy rich, and most of it is just horse hockey. I know, we all wish that we’d gotten in on Bitcoin when it was at like one cent, but now there are like a million different cryptos out there, and a boom like that probably isn’t going to happen with 99.9% of them. Don’t invest with your emotions, use your head and choose an investment that’s actually going to make you money.
This law could also be applied to credit cards or loans. If someone gives you an incredible rate, and your credit score is a little over zero, they’re probably a trickster trying to hit you with a million hidden fees. Understanding when something is too good to be true and knowing what a realistic investment looks like are of the utmost importance when it comes to holding onto your gold.