7 PRINCIPLES OF MONEY - THE RICHEST MAN IN BABYLON

By LeoPuentes.me | Self-learning and successful habits | 16 Jun 2022

Money has become taboo in many communities, whether religious, political, economic, social or cultural. Not surprisingly, negative beliefs hinder wealth and positive beliefs facilitate wealth.

This time I will tell you about a book that I don't know why for some reason was not in our training curriculum in the areas of Economics or Accounting, this book is honestly the beginning, the manual of a true financial education, THE RICHEST MAN IN BABYLON by George S. Clason.

This book, or rather this financial freedom manual as we call it in our community, presents us with the most basic and essential principles to acquire a much broader knowledge in the financial sphere and really start to form a solid foundation towards a successful financial freedom. As the basics are so important, I am going to share with you the 7 fundamental principles that this millennial book shares with us.

1- Save - Start filling the bag.

"The funny thing about life is that if you choose to accept only the best you usually get the best. Sommerset Maugham"

Getting into the habit of saving part of your income is very difficult, but once you get into the habit you start doing it without realising it. It requires a high level of discipline and above all understanding the long term benefits, in the book it is suggested that you save a minimum of 10% of your income but at the beginning it does not necessarily have to be 10%, it can be gradual and the most important thing is not to break the habit.

You could start with 3%, 5%, 7% until you reach 10% or more, you will see that once you start to see how your savings are increasing your motivation will grow and you will look to save more than you initially thought. This principle is so powerful that if you commit to making it a real habit, you will look for different ideas to generate more money and be able to save more. The higher the income, the higher the value of savings.

Unfortunately, a problem arises, a deep-rooted myth in our society that makes it very difficult to start with the practice of this first principle: "Money was made to be spent" "If I have money left over from the month, I save it" "You only live once" and to this we can add the constant bombardment of advertising that encourages consumerism.

Here are two tips, which I used to achieve this habit:

I started saving at the beginning of the payment (I was an employee at the time). As the book says: pay yourself first. Every paycheck I tried to save as close to 10% as possible.
The 52-week challenge. It consists of starting to save $1 in the first week, by the second week $2, third week $3 and so on the amount will be added by 1 each week until the last week which is to save $52. At the end you will have saved around $1,300.

And to finish this first principle of money, I leave you with a sentence from the book The Richest Man in Babylon:

Algamish: "Wealth is like a tree; it grows from a seed. The first coin you save will be the seed that will grow the tree of your wealth. The sooner you sow your seed, the sooner the tree will grow. The more faithfully you water and fertilise your tree, the sooner you will refresh yourself, satisfied, under its shade."

2- Expenditure - Controlling Expenditure

"Winners are those who get into the habit of doing the things that losers are uncomfortable doing. EdForeman"

Expenses are like a hole in a raft, if you don't plug the hole where the water is coming in, sooner or later you will sink. Maybe with the example of the raft you thought why not just take out the water that comes in, but it doesn't work like that, because you will get tired of taking out water and you will sink.

Spending and debt are the number one enemies of our finances and if we don't stop them or if we don't discover the reason for the spending, we will continue to lose money, the time will come when everything will collapse, you will get tired and there will be no money to hold out. It doesn't matter if you earn $500 a month or $700 or $3000 if you don't control them you will always be out of money.

Remember "A small expense kills big income".

For this second principle it is very important to keep track of everything you spend (use an app for expense control, write down in a notebook, keep invoices for purchases, services, sweets, absolutely everything) and at the end of the month you are going to add up each of these expenses classifying them into the following three types:

Fixed expenses (Monthly): These are necessary for daily life, but that does not mean that we cannot modify them; they go from month to month (utility bills, loans, rent, student pensions, car payments, social security, telephone, gym and anything else that has to be paid on a monthly basis).
Direct expenses (Goods): These are completely related to the purchase of goods, such as (clothes, shoes, car, mobile phone, TVs, tablets, etc.).
Ant (casual) expenses: They are so small that you don't notice them, but when they are too many they consume more than the previous ones, such as (ice cream, beer, continuous outings, sweets, etc.).

Once you have sorted them and added them up, you will be able to see where the money is escaping and thus be able to make specific decisions, for example:

Sometimes people tend to contract telephone plans that are absurd and they don't even use 20% of the telephone plan, a solution would be to better adjust the service according to the need. Save more electricity, water service, whatever you can reduce and if you can eliminate them, all the better.
In direct spending, at the time of purchase, analyse from the heart if you need what you are about to buy, if you really need it. To make this step easier, ask yourself the following questions: What will happen if I don't make this purchase? Can you live normally if you don't buy it? These questions are key to avoid falling into the marketing bombardment and you will avoid spending on things that in the future will bring you remorse for having bought something unnecessary, more rubbish to your house and your wallet a little emptier.
Pay even more attention to the extra expenses, as they usually form a domino effect. Don't be embarrassed if others think you are stingy, they won't help you with money or if they help you you will have to pay them back one day. To avoid them try as much as possible to cook at home, avoid sweets, they only give instant pleasure.

And as a result of that thorough list, you will answer the following question:

Is my income greater than my expenditure?

If the answer is NO, it is time to start changing habits so that you can "spend less than you earn".

And to finish this second principle of money, I leave you with a sentence from the same book:

Dabasir: "He who spends more than he earns sows the winds of useless indulgence and reaps storms of trouble and humiliation".

3- Knowledge - Acquiring knowledge to invest

"Whatever you can do, or dream you can, begin. Boldness has genius, power and magic in it. Goethe"

Although it sounds a bit obvious, knowledge will always make you money whatever it is, without it it is not possible to make money. Knowledge can be gained through reading, observation and the discipline of doing. Doing is the most important thing.

A captain is not trained by watching ships from the beach, a captain is trained on the seas. True knowledge is by doing, by experimenting, failing, testing; if you can go to someone with experience in the field you want to learn about, that would be even better. Then the learning curve would be reduced, therefore results can be achieved faster.

You have to be very careful with people who offer very fast and high profits or benefits, such businesses do not exist. There is no magic formula for making money or becoming a millionaire overnight, not in a lasting way. It all depends on a lot of discipline, dedication and a lot of willpower to overcome and do what is necessary to live a carefree and happy life in the future.

Sooner or later, all the knowledge we learn will end up being useful for one or another work or personal situation. To delve a little deeper into this third principle of knowledge, we will ask ourselves the following question:
How to invest in knowledge?

Traditional thinking has led us to believe that large technological investments are required. Modernity dictates that large amounts of money are necessary, but it doesn't have to be that way. I will name some ways to start investing in knowledge without so much complexity, some you may have heard of, some you may not, for each of them you simply need to take advantage of what rich and poor alike have, 24 hours a day.

Let us begin:

Reading is undoubtedly the simplest but most important.
Study the market in which you operate.
Seek experiences from companies in the sector.
Attending trade fairs in the niche of interest.
With Google Alert, you can create alerts to get the latest news of interest delivered to your email inbox.
Conduct free video or text-based training in the sector.

These are some of them and the ones we practice, it's all about eliminating bad habits and making better use of time, as approximately 2 to 4 hours are wasted looking at social networks. Feed and train your mind, just as you feed and train your body.

Don't miss out on the information and knowledge age.

And to finish this third principle of money, I leave you with the following phrases said by characters from the book:

Dabasir: "When you are determined, you find the means".

Arkad: "The man who expects to learn his trade better will be richly rewarded".

4- Investing - Putting saved money to work

"If you want to get rich, your savings must yield returns for you and these returns must yield returns for you! Arkad"

As this fourth principle states, increasing savings goes hand in hand with savings and knowledge, these two form a productive cocktail that has always given great benefits. This mixture is so excellent that great entrepreneurs assure that a project will be more profitable if it is developed with saved money than with borrowed money.

In order to put the money saved into production, it is not necessary to expect to obtain an academic degree or to start a business, but to be clear about principle one and principle three.

Nowadays there are many ways to generate money, but each of them requires patience and doing your best not to interrupt your investment plan, as continuous profitability is required so that your savings purse does not run dry. And of course, diversification should not be neglected, avoid putting all your eggs in one basket.

We share with you this sentence from the book that fits perfectly with the above content:

"A well-filled bag is quickly emptied if there is no source of gold to feed it. Kobi"

Investing is always winning, as you always gain Experience or Money, depending on how you look at it.

What can you invest in? There are many investment alternatives, but these are the most traditional ones:

Real estate
Business or productive projects (Use)
Financial investments (Use)

In short, saving for the sake of saving without a clear objective, is almost the same or worse than spending for the sake of spending simply because you have the money, in addition to that, as is well known by all, money depreciates in value, losing value over time, inflation is responsible for making savings smaller.

Money must become your slave, not you the slave of money. Money should work for you, not you for money.

You have to put aside the thought that in order to generate money you have to work for an employer who pays you every month. Or that you have to earn it by the sweat of your brow, with effort; money nowadays is not necessarily earned with effort, it is enough to repeat the same process many times in an intelligent way.

And to finish this fourth principle, I leave you with a sentence taken from the book The Richest Man in Babylon:

Arkad: "Gold works diligently and profitably for the wise possessor who finds a profitable use for it, multiplying even as flocks in the fields."

5- Protect - Prevent loss of savings

"Gold remains under the protection of the prudent holder who invests it according to the advice of wise men. Arkad"

Prudent and intelligent decisions can only be made on the basis of basic principles, which in one way or another always come from wise men who have gained them through experience. Listening to them and retaining them, whether to analyse them, reproach them or learn from them, depends solely and exclusively on you. Information is now everywhere and that very ease of access to it disorients us, causing us to make many mistakes and among them to lose what we have worked so hard to save.

That is why in this fifth principle, you must pay attention to all the traps and opportunities that life gives. Learning to listen to people who for X or Y reason acquired that wisdom to be able to live and invest.

Whenever you are going to make any kind of investment, make sure you are aware of the risks involved and what tips can help you mitigate them. Risks such as the percentage that can be risked and what consequences that risk would have on your finances.

Many people reject that risk and prefer to save just for the sake of saving. The rejection of risk limits you, I do not mean that you take any risk without evaluating it, this would be irresponsible on my part. Because each person has a different level of risk, such as: Age, family responsibilities, dependents, investment horizon, etc.

A 70 year old with $1000 dollars does not have the same level of risk as a person with the same $1000 dollars but 25 years.

Tip: Diversification helps to mitigate the loss of gains from the first principle and caution reinforces it.

And to finish this fifth money principle, I leave you with one more sentence from Arkad:

Arkad: "Gold flees from the man who forces it into impossible gains, who follows the seductive advice of fraudsters and swindlers, or who points to his own inexperience and romantic investment intentions".

6- Skill - Increasing skill in the acquisition of goods

"Challenges make life interesting and overcoming them makes life meaningful. Joshua J. Marine"

Standing still or static waiting for the best opportunity train to pass by does not sound promising, the sixth principle refers and invites us to be proactive, to be motivated, that we should never be stuck with a single opportunity.

You must be clear that opportunities always exist, but in order not to miss them you must be in constant preparation and research to make a real difference. Being prepared keeps your mind active, it drives you to look at opportunities where no one else can.

Wisdom will make you live better and knowledge will make you money. When you are restless to improve your finances, your brain is automatically programmed to be alert to opportunity and above all to expand your knowledge.

We have a saying in our community that goes: "There is no such thing as luck, there are prepared people", referring to the fact that if you don't prepare yourself, you will never get that longed-for luck.

So, you must have the information and knowledge in which you are investing, such as what are the market trends, what is happening in the world economy, is the dollar going up or down, is there or is there a season of heavy rains, winds, what is hurting investments, what areas of the country are developing, is there employment, is there no employment, etc.

If laziness invades all our dreams, it is impossible to keep our purse full. If there is no constant inflow of money, the purse will sooner or later be empty. The attitude towards everything we set out to do motivates us to strengthen our aptitude.

Without the right attitude and aptitude, any good that we acquire will be lost, because with the slightest inconvenience, the castle that has been built with perseverance and discipline collapses. George Clason said it well: Good preparation is the key to success, for our actions cannot be better than our thoughts.

And to conclude this sixth money principle, I leave you with a sentence from the book:

Arkad: "As a man gets better at his trade, his remuneration increases".

7- Mentor - Find a mentor who knows about the topic of interest.

"Our prosperity as a nation depends on the financial prosperity of each of us as individuals. Preface - The Richest Man in Babylon".

A mentor or counsellor is willing to guide you in the area you wish to improve or acquire new skills.

Defining the right role you want in a mentor will help you feel more comfortable asking questions or seeking advice. A good mentor will guide you and help you learn without any interest.

This seventh principle is fundamental for the learning curve to be less difficult and better still to be able to learn from the mistakes of others without having to make them ourselves. This learning is called LEARNING BY OBSERVATION, which brings unimaginable advantages and above all helps to maintain both the money saved and the money invested.

Be clear that on a personal level you should feel good next to him/her and if possible find these 7 characteristics that are noticeable in a good mentor:

1. Always assess strengths and weaknesses equally.
2. will help you to understand the basic and advanced structure of the subject.
3. It will always present you with new perspectives
4. It will help you to increase your decision-making capacity.
5. will share with you the tricks of the trade in the interest of your learning them.
6. It will give you important resources and useful references
7. He will not hesitate to correct your mistakes

You can find both face-to-face and virtual mentoring, each of which has its advantages and disadvantages, which we will share in a future blog post.
Finding a mentor will help you invest more wisely and of course minimise the risks.

And to finish this seventh principle of money, I leave you with a sentence from the book The Richest Man in Babylon: