We live in an impatient age, and when it comes to money we want more of it now, today, not tomorrow. When it’s a deposit for a mortgage or clearing those credit cards that sap our energy after we stopped enjoying what we bought with them, the sooner the better. When it comes to investing, we want 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 writer George S Clason took another approach. From The Richest Man in Babylon he gave the world a treasure trove – literally – of monetary principles based on things which may seem 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 instance, the five laws of gold. If you are looking to place your personal finances on a solid footing, wherever you are in life, these are for you:
Law No1: Gold comes thankfully and in increasing quantity to anybody who puts by at least a tenth of their earnings to create an estate for their future and that of the family. To put it differently, save 10 percent of your income. Minimum. Save more than that if possible. And that 10% is not for next year’s holiday or a new car. It’s for the long-term. Your 10% can include your retirement gifts, ISAs, premium bonds or any type of high interest/restricted access savings accounts. OK, interest rates for savers are at historical lows today, but who knows where they will be in five or ten years? And compound interest means your savings will grow quicker than you think.
Legislation No2: Gold labours diligently and contentedly for the smart owner who finds profitable employment for it. So, if you’re looking to invest rather than save, do it wisely. No crypto-currencies or pyramid schemes. 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 likely to mean shares in based companies offering a normal dividend and a steady upward trend in share price. You may invest directly, or through a fund manager in the kind of unit trusts, but before parting with a single cent, see Laws 3, 4 and 5…
Legislation No3: Gold clings to the protection of this 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 on the internet. What expertise do they have? What kind 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 work. Check out their commission agreements. Are they independent or tied to a specific company, under contract to push that provider’s financial products? A decent financial advisor will encourage you to get the basics in place: pension, life insurance, somewhere to live, before directing you towards investing in emerging markets and space travel. When you are satisfied that you’ve found an adviser 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. Odds are, if your judgment was sound in the first place, you are going to stick with the exact same adviser for many years to come.
Law No4: Gold slips away from the person who invests it in companies or intentions with which they not familiar or which aren’t accepted by those skilled in its own keep. If you’ve got a deep knowledge of food retail, by all means invest in the supermarket that is increasing market share. Likewise, if you work for a company that has an employee share ownership scheme, it is logical to take advantage of it, if you’re sure that your company has good prospects. Nevertheless, you should never invest in any market or financial product that you don’t know (remember the Crash!) Or can’t fully research. If you are tempted to try your hand at currency dealing or options trading and you have a financial adviser, talk to them first. If they are not up to speed, ask them to refer you to someone who is. Best of all, steer clear of anything you’re not sure about, no matter how big the potential yields.
Law 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 start scouring the web for financial advice and wealth creation ideas, your inbox will soon be filled with”tricksters and schemers” promising you the earth if you will spend #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 1 selling shovels. Buy the incorrect shovel and you will quickly dig yourself into debt. Not only will you 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 this. At the very least you need to check real reviews of the item. And never get any system, investment vehicle or financial product from any company which is not registered by a national watchdog, like the Financial Conduct Authority for the UK.
These five laws are of greater value than gold … Next time we will look at George S Clason’s seven cures for a lean purse.