We live in an impatient age, and when it comes to money we want more of it now, now, not tomorrow. When it is a deposit for a mortgage or clearing those credit cards that sap our energy after we stopped enjoying what we bought together, the sooner the better. When it comes to investing, we need easy pickings and quick returns. Hence the current mania for crypto-currencies. Why invest in nanotechnology or machine learning if Ethereum is locked in an endless upward spiral and Bitcoin is the gift that keeps on giving?
A century ago, the American author George S Clason took a different approach. From The Richest Man in Babylon he gave the world a treasure trove – literally – of financial principles based on things that might appear old-fashioned today: caution, prudence and wisdom. Clason utilized the wise men of the ancient city of Babylon as the spokesmen for his financial advice, but that advice is as important today as it was a century ago, when the Wall Street Crash and the Great Depression were looming.
Take for example, the five laws of gold. If you are looking to place your personal finances on a sound footing, wherever you are in life, these are for you:
Law No1: Gold comes gladly and in increasing amount to anybody who places by at least a tenth of their earnings to create an estate for their future and that of the loved ones. In other words, save 10 percent of your earnings. Minimum. Save more than that if possible. And that 10% isn’t for next year’s vacation or a new car. It is for the long-term. Your 10% may include your pension contributions, ISAs, premium bonds or any kind of high interest/restricted access savings account. OK, interest rates for savers are at historic lows today, but who knows where they will be in five or ten years? And compound interest means your savings will grow faster than you think.
Legislation No2: Gold labours diligently and contentedly for the wise owner who finds lucrative employment for it. Therefore, if you’re trying to invest as opposed to save, do it sensibly. We are focusing on the words”profitable” and”employment”. Make your money work for you but remember the best you can hope for this aspect of the rainbow is steady returns over the long run, not lottery wins. In practice this is very likely to mean shares in established companies offering a regular dividend and a steady upward trend in share price. You can invest directly, or through a fund manager in the form of unit trusts, but before parting with a single cent, see Laws 3, 4 and 5…
Law No3: Gold clings to the protection of the careful owner who invests it under the recommendation of those wise in managing it. Before you do anything, talk to a qualified, experienced financial adviser. If you do not know one, do some research. Check them out Online. What expertise do they have? What type of clients? Read the reviews. Call them first and get a feel for what they can provide you with, then decide if a face to face meeting will operate. Check out their commission agreements. Are they independent or tied to a particular company, under contract to push that company’s financial products? A good financial adviser will encourage you to get the basics in place: pension, life insurance, somewhere to live, before steering you towards investing in emerging markets and space travel. When you are satisfied that you’ve found an advisor you can depend on, listen to them. Trust their advice. But review your connection together at regular intervals, say annually, and if you are not happy, look elsewhere. Chances are, if your judgment was sound in the first place, you are going to stick with the exact same adviser for several years to come.
Law No4: Gold slips away from the person who invests it in companies or intentions by which they not familiar or which aren’t accepted by those skilled in its own keep. If you’ve got a deep understanding of food retail, by all means invest in the supermarket chain that is increasing market share. Likewise, if you work for a business that has an employee share ownership scheme, it is logical to take advantage of it, if you’re positive your company has good prospects. But, you should never invest in any industry or financial product that you don’t know (remember the Crash!) Or can not fully research. If you’re tempted to try your hand at money dealing or options trading and you have a financial adviser, speak with them first. If they’re not up to speed, ask them to refer you to someone who is. Best of all, steer clear of anything you are not sure about, no matter how big the potential yields.
Legislation No5: Gold flees the one seeking impossible earnings or who follows the alluring advice of tricksters and schemers or who trusts his own inexperience. Again, the fifth law follows on the heels of the fourth. If you begin scouring the web for financial advice and wealth creation ideas, your inbox will soon be full of”tricksters and schemers” promising you the ground if you’ll invest #999 in their”system” for turning #1 into #1XXXXXX on the Chicago Mercantile Exchange. Bear in mind, the only one who makes money in a gold rush is the one selling shovels. Buy the incorrect shovel and you will quickly dig yourself into debt. Not only are you going to pay through the nose for a system that has no proven value; by following it you will most likely lose a lot more than the price you paid for it. At the very least you should check genuine reviews of the item. And never buy any system, investment vehicle or financial product from any company which is not registered by a national watchdog, such as the Financial Conduct Authority for the UK.
These five laws are of greater value than gold itself… Next time we’ll look at George S Clason’s seven cures for a lean purse.