We live in an impatient age, and when it comes to money, we want more of it now, today, not tomorrow. Whether it’s a mortgage deposit or paying off those credit cards that drain our energy long after we’ve stopped enjoying what we bought with them, the sooner the better. When it comes to investing, we want easy collection and quick returns. Hence the current cryptocurrency mania. Why invest in nanotechnology or machine learning when Ethereum is on an endless upward spiral and Bitcoin is the gift that keeps on giving?
A century ago, the American writer George Clayson took a different approach. In The Richest Man in Babylon, he gave the world a treasure trove—literally—of financial principles based on things that might seem old-fashioned today: caution, prudence, and wisdom. Clason used the wise men of ancient Babylon as a spokesperson for his financial advice, but the advice is as relevant today as it was a century ago when the Wall Street Crash and Great Depression loomed.
Take, for example, the five laws of gold. If you want to put your personal finances on a solid footing, wherever you are in life, this is for you:
Law #1: Gold comes happily and in ever-increasing abundance to anyone who gives at least one-tenth of his earnings to build an estate for his future and the future of his family. In other words, save 10% of your income. Minimum. Save more than that if you can. And this 10% is not for vacation next year and not for a new car. This is for the long term. Your 10% could include your pension contributions, ISAs, premium bonds or any type of high interest/restricted access savings account. OK, interest rates for savers are at historic lows now, but who knows where they’ll be five or ten years from now? And compound interest means your savings will grow faster than you think.
Law No. 2: Gold works diligently and contentedly for a wise master who finds a profitable occupation for him. So, if you want to invest rather than save, do it wisely. No cryptocurrencies and pyramid schemes. We emphasize the words “profitable” and “employment”. Make your money work for you, but remember that the best you can hope for this side of the rainbow is steady income over the long term, not winning the lottery. In practice, this most likely means shares of well-known companies that offer regular dividends and a steady upward trend in share prices. You can invest directly or through a fund manager in the form of mutual funds, but before you part with a penny, read Laws 3, 4 and 5…
Law #3: Gold is protected by a careful owner who invests it according to the advice of those who handle it wisely. Consult a qualified and experienced financial advisor before doing anything. If you don’t know one, do your research. Check them out online. What experience do they have? What kind of customers? Read reviews. Call them first and find out what they have to offer, then decide if an in-person meeting will work. Check out their commission mechanisms. Are they independent or affiliated with a particular company, under contract to promote that company’s financial products? A decent financial advisor will encourage you to set up the basics: retirement, life insurance, where to live, before steering you toward emerging market investments and space travel. If you’re satisfied that you’ve found a consultant you can rely on, listen to them. Trust their advice. But review your relationship with them at regular intervals, say annually, and if you’re not happy, look elsewhere. Chances are, if your initial judgment was sound, you’ll stick with the same advisor for years.
Law No. 4: Gold eludes those who invest it in enterprises or purposes with which they are unfamiliar or which are not approved by experts in its preservation. If you have an in-depth knowledge of food retailing, definitely invest in a supermarket chain that is increasing market share. Similarly, if you work for a company that has an employee share ownership scheme, it makes sense to take advantage of it if you are confident that your company has good prospects. But you should never invest in any market or financial product that you don’t understand (remember the Crash!) or can’t fully research. If you’re tempted to try your hand at currency or options trading and you have a financial advisor, talk to them first. If they are not in the know, ask them to refer you to someone who is. Best of all, stay away from anything you’re not sure about, no matter how big the profit potential.
Law No. 5: Gold flees from those who seek impossible earnings or who follow the attractive advice of swindlers and schemers or who trust their own inexperience. Again, the fifth law follows the fourth. If you start searching the internet for financial advice and wealth building ideas, your inbox will soon be full of “scammers and schemers” promising you the land if you invest £999 in their “system” for turning £1 into 1XXXXXX on the Chicago Mercantile Exchange stock exchange Remember that only the person selling the shovels makes money in the gold rush. Buy the wrong shovel, and you’ll quickly find yourself in debt. Not only will you be paying through the nose for a system that has no proven value; by following it you will probably lose a lot more than the price you paid for it. At the very least, you should check for genuine product reviews. And never buy a system, investment vehicle or financial product from any company that is not registered with a national regulator such as the UK’s Financial Conduct Authority.