Tagalog Version (Click Here)
George S. Clason’s The Richest Man in Babylon is one of the most popular money and personal finance books out there, and I’d definitely recommend it to you. Fortunately, people consider it to be public domain so it should be easy to find some digital copies online for free.
In my opinion, one of the best things about the book is that although it’s about a complicated topic like money management, it uses simple stories to teach several valuable lessons about wealth. One very important chapter is about the “five laws of gold”. Those five tips about money are what we’ll talk about here, so keep reading to learn more!
The Five Laws of Money
First Law: “Money comes easily to those who save at least one-tenth of their earnings to build an estate for their futures and their family.”
Imagine your level of wealth as an empty farm. If you want a good harvest, you need to PLANT SEEDS first. Similarly, if you want wealth, you need to invest money and let it grow over time. Unfortunately, most of us only know how to EAT the seeds and never leave any to plant. We spend all our paychecks and have none left to grow wealth.
One of the most valuable and effective personal finance tips is to “pay yourself first”. Don’t wait until there’s money left over at the end of the month for your savings. Take a piece of your paycheck and SAVE FIRST. That is the first step to wealth.
Second Law: “Money works hard and contentedly for the wise owner who uses it profitably and it multiplies like the flocks of the field.”
Saving is the first step to wealth, and learning to make your money work through business or investments is the second. If seeds aren’t planted, they’ll dry up and rot over time, and if MONEY isn’t invested, its value will be destroyed by inflation. Imagine how much stuff you can buy with a dollar or a hundred pesos fifty years ago, while it can barely buy stuff now.
You can use your savings to start your own business, or you can invest your savings in stocks, bonds, mutual funds, real estate and other assets to make your wealth grow.
Third Law: “Money clings to the protection of the cautious owner who invests it under the advice of those who are wise with its use.”
I don’t know about you, but when I came out of my mother’s womb I didn’t have any money or investment knowledge in my brain. All I knew was eat, sleep, cry, and soil my diapers. You were very likely the same.
None of us are born knowing about money. We all had to learn about it as we grew older. Unfortunately, most people only know how to earn money through a paycheck or business and how to spend it, but few know how to earn “wealth”. Enough money and resources to live happily and more.
Where can we learn that? Well, we can learn from those who have already done what we want to do. If we want to earn wealth by building and expanding a business, we learn from great business owners. If we want to earn wealth by rising in our careers, we learn from the top professionals in our careers. If we want to earn wealth through investing, we learn from the top investors and traders in the world.
We have to search for their advice, read their books and notes, and use the knowledge if it’s appropriate for what we plan to do.
Fourth Law: “Money slips away from those who invests it in businesses or things they do not understand and the things that are not approved by those who use money wisely.”
Warren Buffet, one of the greatest investors of all time, said that “risk comes from not knowing what you’re doing”. To put it simply, if you don’t understand what you’re doing with your money or you don’t completely know what you’re investing it in, there’s a very good chance that it will end in disaster.
If you haven’t learned how to spot good assets and businesses that make great investments, you can unknowingly put your money in a FAILING business. Even worse you can lose your money in an obvious scam.
None of us are born experts. We have to learn what we need to learn and then act wisely.
Fifth Law: “Money disappears from those who forcibly uses it to earn impossible earnings, those who follow the advice of tricksters and scammers, and those who trusts their own inexperience and emotional desires in investment.”
There’s a saying, “if it sounds too good to be true, then it probably is”. If an offer seems impossibly amazing, it’s likely a scam. Unfortunately, most people don’t have a gauge of what “impossibly amazing” is and people often let greed take control of their decisions. For example, an “investment” that will double your cash consistently every month and without risk? Sounds good! Let’s go!… and then you get scammed.
*Note: The stock market usually increases around 12% or less a year. Sometimes higher, sometimes much lower. There’s always risk, so if you get promised high and consistent returns, be wary as it may be a scam.
The best defense against scams is a little more knowledge. If you know a lot about legitimate investments and how to choose good ones, you will easily be able to detect bad investments and scams when you see them.
- Learn how to save money.
- Learn how to invest or start a business.
- Study the experts.
- Know what you’re doing.
- Don’t let your greed get you scammed.
Those are five simple tips about money and wealth that you should always remember.
We’ll end the lesson here for now, and if you have any questions, just ask us in the comments section below!
[…] English Version (Click Here) […]