Estimated read time: 5-6 minutes
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In 1926, George S. Clason wrote an excellent book outlining key financial principles to achieve financial success. In his book, George takes readers through a series of parables from Ancient Babylon, over 4000 years ago.
These simple stories illustrate the great wealth of Babylon and how prosperous the city was as a great center of commerce. Moreover, the Euphrates River flowed nearby, allowing ample opportunity for agricultural development in the arid climate, which supported the great city.
One man named Bansir, who was in his middle years, felt quite discouraged with his inadequacy in securing wealth. He worked, paid his dues, and was an honest man, and despite all this, he could not see why wealth continually escaped his grasp.
In discussion with friends in similar situations, they lamented that only one of their friends had become wealthy. This friend, Arkad, had a considerable income that was ever-increasing and continually flowing. These men concluded that the best course of action was to inquire of their friend Arkad concerning his advice regarding the principles of wealth.
Let's examine these seven principles first as they were given to Arkad according to his language and then break each one down to find practical applications for our time.
The first cure: Start thy purse to fatten
Arkad instructed his friends that every tenth of what they earned should be theirs to keep – to begin a fortune of their own to keep that no other man could have claim upon.
Modern financial planners refer to this as paying yourself first, but the principles remain the same. Your income is essential, but it primarily pays your bills. Therefore, it is imperative to set aside a portion for yourself, your future, and your financial freedom.
The second cure: Control thy expenditures
Arkad gave wise counsel regarding a budget, "Make it thy first assistant in defending thy fattening purse." You heard it, and in our language, we call that a budget. Basic as it is, simple as it sounds, a budget is so important! In the book "The Millionaire Next Door," statistics show that just 20% of American households use a budget.
Meanwhile, 80% of first-generation millionaire households used a budget on their way to wealth and commonly continue to do so. There seems to be a strong correlation between a budget and greater wealth over the long term. A high income is your offense, but a decent working budget is where you will play excellent defense.
The third cure: Make thy gold multiply
Arkad instructed his friends about the importance of wise investment choices and the significance of consulting with savvy professionals in any particular field of investment. The whole idea he communicated with them was the idea of putting each gold coin to work and reinvesting the proceeds repeatedly to generate a "golden stream" that flows to you whether you sleep, sit, or relax. This is putting your money to work, also known as passive income.
In today's terms, this is investing. Whether through a pension plan, a 401k, or any other retirement savings vehicle, investing for your future is where you'll find an opportunity for compound growth. Setting aside a tenth of all you earn and investing wisely are true standard marks of working towards lasting financial freedom.
The fourth cure: Guard thy treasures from loss
Quoting Arkad, "The first sound principle of investment is security for thy principal." Arkad kindly instructs his friends that risk is the companion of return. He advises them to ensure that their fledgling fortunes are not lost through discipline, research, and the counsel of wise professionals. Financial planners can help you calculate your unique risk tolerance in today's investment world and explain how it factors into your investment portfolio. This is a measure of your comfort level with the relationship between risk and return.
The fifth cure: Make of thy dwelling a profitable investment
In essence, Arkad teaches his friends to own their own homes. Being a homeowner can be an excellent financial decision with the potential to develop equity in your home. Still, Arkad's instructions are also related to a man's soul and the joy it will bring to his heart and that of his family.
The sixth cure: Insure a future income
Life insurance and similar products were not available in the days of Babylon, but the concept and ideas are mentioned in the book. Simply, it is of utmost priority to secure a future income stream for two periods: when your ability to earn has decreased and when you have passed on. Wise individuals would do well to consider what they must do to protect their families and themselves at such periods of life.
The seventh cure: Increase thy ability to earn
Arkad teaches his friends to "cultivate thy own powers," meaning to increase their skill, knowledge, and wisdom. Growth in these areas inevitably leads to increased earning power.
Although these parables are simple and relatively easy to understand, their application and use in your daily life are where real results lie.
We commend many of you for being consciously competent in many of these areas and having acted proactively in your lifetime to take such essential actions in your financial life. To others, we invite you to begin to follow the simple principles that lead you towards a successful financial future. In addition, we would invite you to follow Arkad's counsel to "secure the advice of those experienced in the profitable handling of gold." Consulting with a trusted financial advisor can be a wise idea to protect and preserve your wealth.
We are here to help.
At TrueNorth Wealth, we pride ourselves in being a financial planning firm that is prolific in our ability to guide people through the process to prepare for retirement and fully enjoy financial peace of mind during their hard-earned retirement. We house top-tier retirement financial advisors who can develop a holistic financial plan specifically suited for your unique situation.