Make Money Jot

On Wednesday, I wrote about George S. Clason’s The Richest Man in Babylon.  The book is a succinct presentation of the philosophy of making money.  Inside the front cover, the author wrote a reasoned argument for how he was able to write parables of ancient Babylon and apply the principles of finance for the modern world.

From The Richest Man in Babylon:

“Ahead of you stretches your future, like a road leading into the distance.  Along that road are ambitions you wish to accomplish…desires you wish to gratify.
 “To bring your ambitions and desires to fulfillment, you must be successful with money.  Use the financial principles made clear in the pages that follow.  Let them guide you away from the stringency of a lean purse to that fuller, happier life a full purse makes possible.
 “Like the law of gravity, these laws of money are universal and unchanging.  May they prove to be for you, as they have proven to so many others, a sure key to a fat purse, larger bank balances and gratifying financial progress.”

George S. Clason’s Reason for Understanding the Laws of Money:

• “Money is the medium by which earthly success is measured.
• “Money makes possible the enjoyment of the best the earth affords.
• “Money is plentiful for those who understand the simple laws which govern its acquisition.
• “Money is governed today by the same laws which controlled it when prosperous men thronged the streets of Babylon, six thousand years ago.”

In the second chapter, the author wrote the seven cures for a lean purse.  The seven cures are seven steps for the acquisition of money – the best “How to make money” that everyone can follow.

The Seven Cures for a Lean Purse:

1. “Start thy purse to fattening” = get a job; start earning an income.

Any income is better than no income and you need to start to make money by earning some sort of income even if it may not be a lot.

2. “Control thy expenditures” = start and live on a budget.

The smaller the income, the more important it is to have a budget and control how much you spend and where you spend it.  Take a hint from someone like Donald Trump, who is worth billions; he still knows exactly how much it costs to merely power on his yacht - $5,000.

3. “Make thy gold multiply” = Save 10% and invest that savings so that it will earn interest.

This a compounding effect that is the cornerstone of making money – having your money work for you!  Your money can work for you by earning interest in a money market account, mutual fund, 401k, IRA, or some other interest earning, money management fund.

4. “Guard thy treasures from loss” = risk management and diversification.

Your bank should be able to connect you with a good financial planner (if not, you should find a new bank). The benefit of working with a financial planner is he or she will be able to assist you in defining your plans for investments that will protect your money against loss. Diversification is one of the more popular methods. If you lose money in one investment or one market, you can still come out ahead in the long term from your other investments. A good financial planner will be able to tell you more.

5. “Make of thy dwelling a profitable investment” = own, don’t rent.

Living expenses is a major expenditure, but that expanse can also be an investment.  A home, in the long-term, works to your benefit as the value of the home will increase with the rate of inflations adjusted for the marketplace.  Another cornerstone to making money is to turn your expenses into investments.

6. “Insure a future income” = plan for retirement.

We get old and have to face a period where, for most, the expenses of living outperform income earned.  Nearly everyone in this day and age understands the importance of planning for retirement.  The problem is that most people do not save enough over their lifetime.  Your bank should be able to connect you with a good financial planner (if not, you should find a new bank).  A good financial planner will help you set up an Individual Retirement Account (IRA) and accomplish step six.

7. “Increase thy ability to earn” = position yourself to get a better paying job.

We started these seven steps with starting a job, any job that you can get.  The job may not pay well, but it’s a start.  The next five steps positioned you for a lifetime of better money management and long-term money principles for a lifetime of making money.  The final step is to compound the effect of each of these by increasing what we started with, your income.

Education is a great investment

One of the best investments that anyone can make is on education.  Paying for college is expensive, but, for most, the return on investment is high.  A lawyer or a doctor may have to pay for seven or more years of college, but the end result is a large salary that allows most to pay off the student loans and still have money left over to live a nice lifestyle.

What everyone can do

While a college education may not be the best fit for everyone, you can still gain experience in a job, learn everything about the industry that you work in, demonstrate a strong work ethic, work towards a promotion (or multiple promotions) and earn a higher paycheck.  The higher paycheck results in steps 2-5 having a greater effect on your wealth.

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