Why there are rich people and poor people? How do rich people become rich? Why there were able to achieve that financial success in their life? Are there are any laws of money that they follow?
According to the book The Richest Man In Babylon by George Clason, there are five laws of gold (money).
The Five Laws of Money
First Law: “Gold comes gladly and in increasing quantity to any man who will put not by less than one-tenth of his earnings to create an estate for his future and that or his family.”
Save at least 10 percent of your income. But if you can afford more, the better. Saving money is essential in building your wealth. The right formula for saving money is INCOME – SAVINGS = EXPENSES and not INCOME – EXPENSES = SAVINGS. Set aside first a portion of your income and you can spend the rest.
Second Law: “Gold labors diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.”
The money that you were able to set aside can be used for investing. By this, you can increase your sources of income. Do not just focus only on saving, but focus more on increasing your income. Look for other sources of income if you really want to become wealthy. Money can work for you. And what’s good is that money never gets tired unlike us.
Third Law: Gold clings to the protection of the cautious owner who invest it under the advise of wise men in its handling.”
To be able to protect your money, you need to increase your financial literacy. Learn more, ask some help from others or read books. However, be careful about to whom you seek a piece of advice. Seek advice only from the people who are experts in that field. If you want to learn regarding on stock market, ask only from those who are good at it. If you want to know more about life insurances, asks from a financial advisor.
Do not hesitate to look for assistance or guidance, most of them are very willing to help. Better yet, ask not only from a single person. It is better to listen to also the opinions and views from more than one and try to evaluate it afterward.
Fourth Law: “Gold slips away from the man who invests it in the businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.”
There are many investment vehicles you can choose from. All of those investment types are good. But before venturing to any investment, you need to learn and understand it first how it works. There are things that you need to consider first before investing.
Do not invest immediately, chances are your hard-earned money will be gone. Do not invest based only on its popularity. As what Warren Buffet said, “Never invest in a business you can’t understand.” Try to assess afterward if it suits your personality.
Fifth Law: “Gold flees the man who would force it to impossible earnings or who follows the alluring advise of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.”
Be careful in “investment scams”. Be careful on those promises that in a short period of time your money will grow fast. If it’s too good to be true, the higher the chance that its a scam.
You can avoid this by increasing your financial IQ – read books, attend seminars, listen to podcasts. Do not be carried away and if you are new in investing, learn it first.
I believed that the stated laws of money still hold true and these are some of the basic principles in personal finance. How about you? Do you have some laws of money that you are following too? Share it in the comment section below.