Quick snippets from our morning read on Tuesday, 09th March 2021
Today’s morning read is an article by Nathan Shooter on the lessons from The Richest Man in Babylon, a book by George S Clason. You’ll be surprised at how approachable the author’s ideas are; financial common sense divided into 7 simple parts. From my experience, I found that the key to applying the principles was to keep it simple, so that I could be consistent. Significant financial change begins with simple steps. Let’s dive in!
1. Pay yourself first – “Start thy purse to fattening”
- Learn to see the value of your work, and place a priority on paying yourself first.
- Create a simple system to allocate where your money gets spent. Here’s a quick look at how I aim to divide it:
10% = Pay yourself first.
10% = Pay debts (start with most small, expensive, high interest debts first).
10% = Future savings.
10% = Generosity (charity, church tithe, non-profit organisations etc.)
60% = Living expenses, including mortgage.
2. Live within your means – “Control thy expenditures”
- Don’t spend more than you make.
- Either spend less, or earn more.
- Be clear on the difference between a desire and an expense (especially for those of us in business).
- Resist the habit of spending more as we earn more. Just because our income might increase, doesn’t mean our spending should.
3. Make money work for you – “Make thy gold multiply”
- Understand compound interest, and how you can benefit from it.
- Bank interest: Consider opening an online high interest account, that you can’t access with a ATM card.
- Investments: Only invest after you have saved a reserve of 6-8 months worth of living expenses.
- There are many investment vehicles, choose the one you understand the most (I experimented with Forex, but pursued other things instead).
4. Safeguard your wealth – “Guard thy treasures from loss”
- Have a variety of insurance policies, income protections etc..
- Create financial reserves (emergency funds).
- Avoid investments that sound ‘too good to be true’ (they probably are).
- Remember “it costs nothing to ask a good friend for counsel”.
- Seek advice from people who are experts in their particular field, people who have actually experienced what you’re attempting.
5. Own your own home – “Make of they dwelling a profitable investment”
- Where possible, own your home.
- Be smart about your biggest expense/investment, if it isn’t home ownership.
- Buy a home that is below the maximum you can afford, yet one that you can still enjoy.
Read the rest of the article here.
And as always, if you enjoyed this, check out the rest of our daily snippets, curated daily, right here on The Red Notebook.
