The 5 Laws of Gold From the Richest Man in Babylon

Warren Buffet says, “If you don’t find a way to make money while you sleep, you will work until you die.” 

Well, how can you make sure that your money is working for you? 

The answer to this question can be found in the five laws of gold as highlighted in a 1926 book by George S. Clason titled ‘The Richest Man in Babylon’. 

Arkad, Babylon's richest man, devised the five laws of gold, which were popularised by Kalabab, a camel dealer. One of the most notable aspects of this book is its timeless financial advice. Clason's ideas are life-changing, whether you want to pay off your debts, become wealthy, or simply be financially stable.

This article will look at these five principles and how you can implement them in your journey to wealth creation.

Law #1

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.

You acquire gold by saving regularly (at least a tenth of your earnings) to build wealth for a secure future.

This covers the concept of a diligent savings plan, which is the first step in the journey to financial freedom. You are supposed to save at least ten percent of all you earn. Paying yourself first, and spending less than you earn are part of this concept.

The book recommends that you save 10% of your income, for starters, but implementing the 50/30/20 rule that gives you 20% savings can boost your financial automation.

Going by the 4% rule, which suggests the total amount that a retiree should withdraw from their retirement savings each year, you need to save 25% of your annual spending to retire safely. For instance, if you need around KSh 1 million annually to retire, you should save KSh 250k. Annual returns and years to save depend on your financial situation and source.

Read Also: How to Budget and Save a Lot of Money as an Employee

Law #2

Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

The second law is a continuation of the first. Saving money alone isn't enough; you also need your money to work for you and investing is the most efficient way to do this.

You may raise your "gold" through a number of investment options like investing in stocks, real estate, and commodities. It is good to also note that some investments are riskier and yield higher returns than others so it is within your control as the investor to decide what you will invest in and how much risk you are willing to take.

If you make wise investments, your money will increase in value. Again, a rather simple and easy law, yet many people fail to follow it because they ignore the first one.

Read Also: 7 Ideas to Diversify Your Sources of Income

Law #3

Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.

It is preferable to be prudent with money than to live in regret. Be careful because there are several wrong investments seeking your money. Some of them will guarantee you large earnings within no time but remember to think twice before you leap.

Many people have been duped out of their hard-earned money because of such empty promises of quick profits. The disadvantage of that type of loss is that it may never be recovered and the results are traumatic.

Get the advice of specialists in the subject of money before investing any cent. Avoid paying attention to people who have little or no subject-matter knowledge.

This third law protects you against risk, prevents loss, and protects your money and assets from fraudulent investments.

Remember, your gold will stick around and grow if you follow competent advice from financial experts.

Read Also: Money and Me: Losing a Girlfriend and a Fortune

Law #4

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.

This golden guideline is accompanied by a word of warning.

You should obtain advice from industry experts before entering a business with which you are unfamiliar. If you are inexperienced with a certain investment option, you face the risk of experiencing big losses.

In a similar way, ignoring expert cautions and recommendations puts you in jeopardy. Investing may look difficult to a beginner due to technical jargon and the unique qualities of each option, but it may be simplified through research.

Reading books, watching films, exploring websites, taking online courses, and consulting professionals may all help you improve your financial knowledge.

You should only invest in a firm after thoroughly researching it.

Read Also: What to Do When You Lose a Large Sum of Money

Law #5: 

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.

Remember what we said about thinking twice before you leap? Investment fraud is all too typical these days. There's a strong chance you know someone who has gone through it. Perhaps you've been a victim in the past.

Because of their attractiveness, these companies attract enthusiastic people but their trust is eventually violated. With the internet as widespread as it is and cryptocurrencies becoming more popular, you may never see an end to investment fraud. Unfortunately, social media has provided fraudsters with several avenues for contacting potential victims.

In this case, the fifth law of gold applies and, like its predecessor it also, delivers a warning.

It serves as a check on people's impatience and drive to become rich fast. It urges people not to invest with false expectations, to avoid entering unfamiliar domains, and to be cautious of anybody who approaches them with a business proposal.

It takes time to get wealthy by ethical means. Don’t be in a rush. Furthermore, you should always safeguard your earnings.

Steps to Implement The 5 Laws of Gold

Step 1: Budget

A budget refers to a plan on how you are going to spend your income. Budgeting your finances allows you ample time and decision in meeting your expenses including savings and investment. 

The five laws of gold talk about savings and investment, with knowledge as a key factor defining your journey to wealth creation. A well-planned budget ensures that you spend less than you earn, set aside money for emergencies, and invest your money in valuable asset classes that can give you sustainable returns.

Step 2: Save

Saving simply means setting aside a percentage of your income for future expenses. The first law of gold states that you should save at least a tenth of your earnings to create wealth. Following this step keenly, with a budget in mind, you could come up with a savings plan that ensures you have several savings products that secure your finances like an emergency fund, sinking fund, holiday fund, and education fund.

Step 3: Invest

Investment is covered in the remaining four laws of gold. 

It involves allowing your money to work and earn returns for you. You could invest in various passive income generating sources like dividend income, interest income, rental income, capital gains income, royalties, licensing, and business income. Investing in several assets real estate, securities, bonds, and stocks could keep your gold coming in frequently.

Step 4: Learn and Analyse  

Knowledge is significant in the wealth creation journey. The 5 laws of gold require that you learn, acquired expert knowledge, and analyse the kind of investment before stashing your money into it. You should equip yourself with trends in the market including shifts in asset values, conditions, and viability before. For instance, if you are investing in foreign currencies, learn more about the forex market, and get expert views about some currencies and their rates before signing in.

Wrapping Up

The 5 laws of gold are timeless in defining the journey to wealth creation. They are clear and informative about money rules that should be studied for a progressive course to financial freedom. 

These rules require a step-by-step follow-up in order to keep your financial goals on track. They show that knowledge in planning and budgeting for your finances should be applied at every point of your wealth creation endeavours.

‍