On “The 5 Laws of Gold” | The Richest Man in Babylon | Book Club: Lessons Learned #5

The "5 Laws of Gold” are presented in a tale about Nomasir, son of the richest man in Babylon. Arkad, the richest man in Babylon, tells his son that in order to become heir to his sizable estate, he must first learn how to create wealth and then how to manage and safely continue to grow it for years to come.

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Current Book & Quotes From: The Richest Man in Babylon by George S. Clason

 
 

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Arkad gives the following to his son to take on his 10-year journey to learn about wealth:

• A horse
• A slave
• A bag of gold
• An inscribed tablet containing "The 5 Laws of Gold”

Nomasir embarks on his journey to learn about money and the world. Along his journey he loses the bag of gold his father gave him, he is robbed, scammed, falls into a bad business partnership, homeless and eventually ends up working a very low-paying and terrible job building walls. Through all this hardship, Nomasir finally realizes that the most important lesson his father wanted to teach him was that wisdom is far more valuable than gold.

Upon his return to his father to speak of his journey and prove that he had learned the ways of the world and wealth, Nomasir tells his father that he learned the following:

“To him who is without knowledge of the five laws, gold comes not often, and goeth away quickly. But to him who abide by the five laws, gold comes and works as his dutiful slave.”

Nomasir presents 1 bag of gold before of his father, representing the original gold he had gifted to his son. Then Nomasir places 2 more bags of gold before his father and says:

"This I do to prove to thee, my father, of how much greater value I consider thy wisdom than thy gold. Yet, who can measure in bags of gold, the value of wisdom? Without wisdom, gold is quickly lost by those who have it, but with wisdom, gold can be secured by those who have it not, as these three bags of gold do prove.”

The 5 Laws of Gold:

The First Law of Gold:

“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.”

The first law of gold is simply to save a portion of your income. Every time you get your paycheck, save a bare minimum of 10% of it for investing. Saving a portion of your income has been touted as the key to wealth by many influential and successful people such as Tony Robbins.

There are always a few common objections people have when you tell them to save 10% of their paycheck:

• "I can’t afford to save 10%, I have bills.”
• “My paycheck is only ($300)/week, that won’t be worth investing”
• “I’ll wait to invest until I have money”
• “I don’t know how to invest.”

These objections are simply excuses. They completely miss the point of the idea of saving 10% of your paycheck. Tony Robbins would tell you that you can afford to save 10%, you just don’t want to. He would tell you that the 10% is your freedom tax. You pay taxes to the government, don’t you? So if you can afford to pay 15-40% of your money to the government via forceful taxation, why can’t you force yourself to "tax your paycheck” by 10% more? Cancel some useless subscriptions if you have to. Save money by carpooling or riding a bike to work. Use coupons to save money on groceries. Find a cheaper place to live… The options are there, you just need to have the will to make it happen.

Your paycheck is only $__/week, and that’s not enough to invest… That’s the most ridiculous excuse I’ve ever heard, yet its the most common one given. If you’re not willing to save a penny when you have a dollar, why would you save a dollar when you have a hundred? Money is based on perspective and money accumulates over time. If you save only 10% of a $300 paycheck every week, you’ll be saving $30 every single week. That’s $1,560 every single year.

The true wealth comes when one takes that $1,560 and invests it so that it earns even more money. 10 years of doing this can lead to a significant stockpile of money that could bring a rather large and passive income stream for the rest of your life.

The Second Law of Gold:

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

Ever heard the phrase, “The rich get richer”? The rich are always getting richer because they are making their money work for them. Rather than continuing to trade their time for money, they trade their money for more money. You only have so much time available in your day for you to work and earn money for your time, so why not put your money to work? Your money will work for you 24 hours a day, 7 days a week, 365 days a year and it will never complain.

The Third Law of Gold:

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

Always be careful when investing your money. Nomasir learned this law the hard way by entrusting his gold with men who were malicious and unwise in its handling. Consider seeking professional advice when investing and always do your own research so that you understand where your money is, how its performing, the risks associated with the investment, etc.

The Fourth Law of Gold:

“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.”

The fourth law goes hand in hand with the third. Always do your research and never invest in something that you don’t understand. You may be able to hire a professional to manage your investments, but even if you do that, you should have at least a basic knowledge of what said professional is doing with your capital. A lack of understanding is the greatest vulnerability to any investor.

The Fifth Law of Gold:

“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.”

Again, always do thorough research on your investments before making them! Understand the downsides, the nuances of the market, who could be out to get you, what are your vulnerabilities?

It is all too common for people to get scammed or fall prey to some financial scheme that promises outrageous, magical returns with no downside. Don’t be one of these people. As I said, a lack of understanding is the single greatest vulnerability to any investor. Don’t chase big returns without understanding the downside. There is always a downside, otherwise, why wouldn’t everyone make that very same investment!

⍞ Quotes from The Richest Man in Babylon ⍞

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