Last updated on September 11th, 2020 at 11:43 am
“To him who abides by the five laws, gold comes and works as his dutiful slave.”
In the 1920s, George S. Clason published a number of pamphlets on the secrets of financial success. These pamphlets were later assembled as The Richest Man In Babylon.
The pamphlets were written as narratives, the most famous of which was the story of Arkad. Arkad had become the richest man in Babylon by abiding by the five laws of gold.
A powerful story in the book is that of Arkad’s grown son, Nomasir. Before Nomasir can inherit his father’s fortune, he ventures out into the world to learn how to build a fortune of his own.
To get him started on his journey, Arkad gives Nomasir three bags of gold and a clay tablet engraved with “the five laws of gold.”
Reminiscent of the parable of the prodigal son (Luke 15: 11–32), Nomasir tries his hand in a number of ventures and nearly squanders everything. He eventually comes to himself (Luke 15: 17). He dedicates his life to the study of the five laws of gold that his father had given him upon the engraved tablet.
Through skillful application of the five laws, Nomasir returns to Arkad years later having multiplied the gold with which he started.
Upon arriving in his father’s house, Nomasir shares this powerful maxim:
Without wisdom, gold is quickly lost by those who have it, but with wisdom, gold can be secured by those who have it not.
Here are the five laws of gold that made the richest man in Babylon the richest man in Babylon.
The First Law of Gold
Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.
Interpretation: “Money comes to those who save.”
Rich Dad, Poor Dad author Robert Kiyosaki said that this first law embraces the concept of “paying yourself first.” And to pay yourself first, you need to exercise self-discipline.
If you have never saved before, then it will likely take time to adjust to living on less than you make.
One way you can save is through contributions to your employer’s retirement plan. The money is taken out of your paycheck and deposited into your retirement account before you ever see it or even have the chance to spend it.
However, before you contribute to your employer’s retirement plan, consider the statistic that only 40% of Americans would cover a $1,000 emergency with savings. There is a reason that Dave Ramsey’s baby step #3 is to save 3–6 months of expenses in a fully funded emergency fund and his baby step #4 is to then invest 15% of your household income in retirement.
Deciding to take Ramsey’s advice, I decided last year to stop contributing to my 401(k).
Instead, I now contribute 10% of my gross pay to a high-yield savings account. We have 5 months of expenses saved, and we will have a full 6 months of expenses put away by the end of 2020.
I have experienced firsthand the tremendous results of single tasking.
In the past, I multi-tasked (i.e., building up an emergency fund, saving for retirement, paying a little extra toward my mortgage, and saving for my children’s retirement) and got nowhere real fast. But an intense focus on one financial goal has changed my life.
Somehow, some way, as you show God, the universe, your higher power, etc. that you have self-discipline, “gold” will come “gladly and in increasing quantity” into your life.
Give it a shot. I bet you’ll love the outcome.
The Second Law of Gold
Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.
Interpretation: “Money multiplies for those who invest it.”
I am reminded of the parable of the talents in Matthew 25: 14–30. As you may recall, a man has three servants: to one he gives five talents, to another two, and to the third servant he gives just one talent.
The first two servants double their talents — from five to ten, and from two to four respectively. The third servant, however, had hid his one talent… He feared what might happen should he lose it.
As expected, the master was well pleased with his servants who multiplied their talents, and was not with the servant who did not.
The amount of talents didn’t matter… what mattered was finding “profitable employment” for the talents and multiplying them.
Are you finding “profitable employment” for your “gold”?
Are you multiplying what you have?
I have a friend who finds “profitable employment” for his cash in hard money lending. He lends out cash in increments of $25,000 and $50,000, and makes double digit returns on the investment.
The investment is secure. The last time I spoke with him he had never lost his principal on a hard money lending deal.
If you had $25,000 or $50,000 in your account, would it burn a hole in your pocket? Remember the first law… if you have the self-discipline to stop spending everything you make, then you will have the necessary capital to invest to achieve the lifestyle you’ve always dreamed of.
The Third Law of Gold
Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.
Interpretation: “Money stays with the person who entrusts it to wise people.”
Like politics and religion, it seems like everyone has an opinion when it comes to investing.
Dave Ramsey teaches how to eliminate debt and then avoid it forevermore. He is a proponent of investing in mutual funds, 401(k)s, and Roth IRAs. According to Ramsey, these should be the foundation of your retirement savings.
Robert Kiyosaki has taught millions of people the power of accumulating assets, especially real estate. Unlike Dave Ramsey, Kiyosaki does not recommend mutual funds, and he utilizes debt in the acquisition of his rental properties.
Tony Robbins and Peter Mallouk took a deep-dive into the power of index funds in their book Unshakeable. The book offers fascinating insights on how fees in traditional mutual funds, the funds that Dave Ramsey recommends, deteriorate the funds’ growth potential over time.
R. Nelson Nash in his fascinating book Becoming Your Own Banker shares how to cut lenders out of your life through the strategic use of whole life insurance policies. Dave Ramsey, on the other hand, does not recommend whole life insurance. Nash teaches how to avoid the stock market entirely — the ultimate way to eliminate risk.
So who is right?
Honestly, each of these individuals has enjoyed tremendous financial success following the strategies above.
Thus, more important than the “what” of investing is the “how” of investing… Be cautious, do your homework, and find wise, financially savvy individuals who can help you succeed. Pick a strategy that resonates with you, and which you understand.
If you don’t have the knowledge to invest successfully, then make an investment in someone who does. Paying a financial advisor will cost you, but future investing mistakes without an advisor will cost you even more.
The Fourth Law of Gold
Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.
Interpretation: “Money is lost when invested in things with which you are not familiar.”
Twenty years ago, an elderly couple I know was awarded a large sum of money in an insurance settlement.
This couple, to the displeasure of those privy to the situation, elected to invest the entire sum of money (in excess of $100,000) with a family friend in the put and call options market.
I don’t know how much time it took this friend to lose the entire investment, but lose it they did. The couple immediately forgave this friend, a true act of kindness. But the fact was that the couple were in their 70s now, and their investment was squandered.
In hindsight, the arrangement between the couple and their friend seems incredibly unprofessional. For example, the couple had no idea that their investment was losing money until it was gone and the friend came forward and admitted it.
You should never take such a risk with your money.
Where is your “gold”?
Are you invested in a 401(k) or an IRA? If so, do you understand what it will take to comfortably retire?
There are a lot of ways to invest your money. But before you invest, make the time to understand what you are investing in.
The Fifth Law of Gold
Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.
Interpretation: “Money is lost at a fast rate by pursuing get-rich-quick schemes.”
I lost $400 last year to a scammer.
You’re right, I should have known better. I have an accounting degree. And because I understand money, I am also familiar with the horror stories of “get rich quick” schemes.
All I can say is fortunately it was only $400.
The scammer reached out to me through Instagram. He traded cryptocurrency and had developed a process whereby my investment would only grow, never decline.
Looking back on it now it sounds like a fraud, but it sure was appealing in the moment.
What I needed was self-discipline. I can assure you, I am a different man than the person who made such a foolish mistake.
And I won’t make the same mistake again. But take it from me — if it sounds too good to be true… it is.
Make Money Work for You
To him who abides by the five laws, gold comes and works as his dutiful slave.
The five laws aren’t sexy… but they are based on true principles that work.
To me, the most exciting part about the five laws is not only the promise that “gold” will come, but that it will “work as [my] dutiful slave.”
There are many reasons you might desire financial independence… For me, financial independence means freedom.
Freedom to work on what I want, when I want, how I want.
Getting wealthy may not cure every problem, but it sure can cure a lot of them. — Dean Graziosi