The five golden laws

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 clearing up 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 choices and quick returns. Hence the current craze for cryptocurrencies. Why invest in nanotechnology or machine learning when Ethereum is locked in an endless spiral upwards and Bitcoin is the gift it continues to give?

A century ago, the American writer George C. Klason took a different approach. In The Richest Man in Babylon, he gave the world a treasure — literally — of financial principles based on things that may seem old-fashioned today: prudence, caution, and wisdom. Klason used the sages of the ancient city of Babylon as spokesmen for his financial councils, but this advice is as relevant today as it was a century ago, when the collapse of Wall Street and the Great Depression were looming.

Take, for example, the five golden laws. If you want to put your personal finances on a sound footing, wherever you are in life, they are for you:

Law №1: Gold comes with pleasure and in ever-increasing quantity to anyone who puts in at least a tenth of their income to create an estate for their future and that of their family. In other words, save 10% of your income. At least. Save more than that if you can. And that’s 10% not for next year’s holiday or a new car. This is in the long run. Your 10% can include your pension contributions, ISAs, premiums or any type of high interest / limited access savings account. Well, interest rates for savers are now at historically low levels, but who knows where they will be in five or ten years? And compound interest means your savings will grow faster than you think.

Law №2: Gold works diligently and contentedly for the wise owner who finds a profitable job for it. So if you want to invest instead of saving, do it wisely. No cryptocurrencies or pyramid schemes. We focus on 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 a stable long-term return, not lottery winnings. In practice, this is likely to mean shares in established companies offering a regular dividend and a steady upward trend in share prices. You can invest directly or through a fund manager in the form of unit trusts, but before parting with a penny, see Laws 3, 4 and 5 …

Law №3: Gold adheres to the protection of the prudent owner, who invests it under the advice of the wise in handling it. Talk to a qualified, experienced financial advisor before taking any action. If you don’t know one, do some research. Check them out online. What experience do they have? What customers? Read the reviews. Call them first and find out what they can offer you, then decide if the face-to-face meeting will work. See their commission arrangements. Are they independent or tied to a particular company under a contract to push the company’s financial products? A decent financial advisor will encourage you to lay the groundwork: retirement, life insurance, living somewhere before directing you to invest in emerging markets and space travel. When you are happy to have found a counselor you can count 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 that if your judgment was initially reasonable, you will stick to the same advisor for many years to come.

Law №4: Gold escapes from those who invest it in businesses or purposes with which they are unfamiliar or which are not approved by the experts in its safekeeping. If you have a deep knowledge of food retail, be sure to invest in a supermarket chain that increases market share. Similarly, if you work for a company that has a shareholder ownership scheme, it makes sense to take advantage of it if you are sure that your company has good prospects. But you should never invest in a market or financial product that you don’t understand (remember the crash!) Or can’t fully explore. If you are tempted to try your hand at currency trading or options trading and you have a financial advisor, talk to them first. If they are not in a hurry, ask them to point you to someone who is. Best of all, beware of anything you are not sure about, no matter how great the potential.

Law №5: Gold flees from one who seeks impossible income, or who follows the enticing advice of fraudsters or insidious people, or who trusts his own inexperience. Again, the fifth law follows the fifth of the fourth. If you start searching the internet for financial advice and wealth creation ideas, your inbox will soon be full of “scammers and intriguers” promising you land if you invest £ 999 in their “system” to turn £ 1 into 1 pound of the Chicago Mercantile Exchange. Remember that the only one who makes money in gold rush is the one who sells shovels. Buy the wrong shovel and you will quickly dig into debt. Not only will you pay through the nose for a system that has no proven value; by following it, you will probably lose much more than the price you paid for it. At the very least, you should check out genuine product reviews. And never buy any system, investment instrument or financial product from any company that is not registered with a national supervisory authority, such as the UK Financial Administration.