The Basics of Babylon
They say a fine wine gets better with age. And maybe that is also true of financial advice. The Richest Man in Babylon is a book by George Samuel Clason. The book published a series of pamphlets written in parables, set in the ancient city of Babylon some 6,000 years ago. Through the characters experiences in business and managing personal finances, the story provides timeless financial advice and fundamental guiding principles for managing your gold.
Sometimes, it feels good to get back to basics. Within the story, Arkad – who is the richest man in Babylon – hands down the ‘Five Laws of Gold’. So today, we take a look at these five laws and discuss them in a modern context.
- “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”
In simple terms – you must save one-tenth of your earnings as a bare minimum. Gradually, your savings will accrue, and once comfortable saving one-tenths, you should aim to proportionally increase this figure.
- “Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field”
Saving your money is one thing, putting your money to work is another. Law two implies that those who seek smart investments for their money, will see it multiply successfully. A simple notion that many people fail to follow.
- “Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling”
This rule urges caution in investing, and encourages investors to seek expert knowledge in order to minimise risk. If you have strong knowledge of a particular industry or investment – fantastic. If not, there are always people – such as our expert financial planners – to help.
- “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 who are skilled in its keep”
Law four is closely related to the third. Simply put, if you do not have experience or knowledge in investing your money, or invest in areas you don’t understand, you have a considerable chance of losing money. Again, inexperience or knowledge does not forfeit you the opportunity to invest – just seek professional advice.
- “Gold flees the man who would force it 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”
It is easy to be enticed by anything that promises overtly high returns. But the relationship between risk and reward must be considered. As the old saying goes, if it sounds too good to be true, it probably is.