The 5 Laws Of Gold Explained

The 5 Laws Of Gold Explained

What are the 5 laws of gold? In short, they are the five golden rules of money.

From George Clason’s popular classic The Richest Man in Babylon, we get a collection of timeless financial advice.

When applied correctly, these principles grant our wishes like Aladdin’s genie.

Whether we want to pay up our debts, get rich or just be financially stable, the lessons of Clason’s book are transformative.

The Richest Man in Babylon is a collection of parables Clason used to distribute to banks during the 1920s.

Parables have always been used to convey truths in storytelling.

That makes them revered, much like proverbs. Clason made an excellent choice of literary style to teach.

The parables take us all to Babylon, and each recounts the story of a particular character in view of teaching us something at the end.

From a disgruntled chariot builder to the success stories of wealthy men, each piece leaves us with knowledge.

The stories tell us how to fatten our wallets, pay up debt, get ‘lucky,’ lend money, and preserve our finances.

It has and remains indispensable for anyone even mildly interested in changing their financial situation. 

Amongst these words of wisdom, we have the 5 Laws of Gold.

These laws are not about mining, purchasing, or refining real gold.

They are money rules that we should apply to our finances to save and invest well.

If you have problems saving, fall victim to fraudulent investment schemes, or have poor money habits—these laws can be your medicine.

You need to learn, grasp, understand, and pull them into your existence. 

While the book is an old one and may seem outdated due to the difference in English, their lessons remain unchanging.

They form the foundation of many modern books on finances today. 

Let us look into the five laws of gold devised by Clason, explain them, and see how they are useful to modern people like us.

Also Read: The Richest Man In Babylon Summary & Book Review

The 5 Laws of Gold and How to Use them

Arkad, the richest man in Babylon, devised the five laws of gold to train Nomasir, his son, on the subject of wealth so the latter would not waste his inheritance.

Alongside the laws, Arkad gave Nomasir a pot of gold and sent him into the world.

We got to learn that, while Nomasir did squander the gold, he built back his wealth with the laws. 

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.”

The first law of gold is the major emphasis on the third chapter of the book, ‘the 7 Cures for a Lean Purse,’ and this is the first step to financial independence.

Heard of the maxim ‘Pay yourself first?’

That is the 21st-century version of the first law.

It stipulates that you should keep a part of your earnings as yours. 

We tend to assume that the income we get from our jobs and businesses belongs to us.

However, the truth is they don’t automatically become ours.

We use the money in our purse to pay bills, go shopping, get foodstuff, subscribe to Netflix, and cover other expenses.

By doing this, we pay into the wallets and bank accounts of other people.

In the end, we find ourselves expecting the next paycheck, which we spend again. 

The only amount that belongs to us is the one we put aside as savings.

Clason, through his character, advises us to ensure that 10% of our earnings be saved.

This is a little cut from our income that won’t affect our living or make us lack.

As we keep on with this habit, we build up a treasure to call our own. 

This equally serves to curtail spending habits and guides us into living within our means.

By living with 90% of our savings, we learn to prioritize needs and not buy stuff we don’t need.

The Second Law of Gold

“Gold laboureth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.”

The second law is like a sequel to the first.

It is not enough to just save; the money has to work for us.

The best way to achieve this is through investment. 

There are different investment options you can go through to multiply your ‘gold’.

Stock, real estate, and commodities are common examples.

Some give higher returns than others and are riskier.

It depends on you, the Investor.

It’s better not to have just one investment business. Diversify your portfolio.

By investing our savings, we gain an extra stream of income without too much effort on our part.

It is better than spending our savings on trivial things.

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.”

When it comes to money, it is best to proceed with caution than to suffer regret.

There are tons of investment businesses clamoring for your cash.

Some of them promise huge returns in a short period of time.

Attracted by the possibility of instant returns, many investors fall victim to scams and lose their savings.

Money lost that way may never be regained. The aftermath is traumatic.

Remind yourself of some expressions so popular they are cliches now: 

  • Not all that glitter is gold. 
  • If it sounds too good to be true, it probably is.

Get advice from knowledgeable people in that sector before you commit any amount to it.

Do not make the mistake of listening to people with little or no expertise in the field.

If you want to invest in the stock market, for example, get guidance from a broker. 

This simple law guards against risk, prevent loss, and protects you and your money from fraudulent investments.

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.”

The reason you should get advice from experts in the field is to avoid venturing into a business you are not familiar with.

This law of gold comes with a note of warning.

If you are ignorant about a particular investment option, you risk incurring heavy losses.

In the same vein, if you neglect the warnings and tips from experts, you put yourself in a bad place.

Investment may seem complicated to a newbie with technical jargon and peculiarities to each option, but it can be made uncomplicated through study. 

In addition to seeking expert opinion, build your investment knowledge with books, movies, website articles, online classes, and other resources.

Only after you’ve learned enough about a business should you invest in it. 

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.”

This takes us back to the saying: if it sounds too good to be true, it probably is. 

Scam investments are rampant nowadays.

Chances are, you know someone who has fallen victim to it.

Perhaps you have been a victim yourself.

The attractiveness of these investments makes them draw in willing investors who end up suffering the backlash of their trust.

With the internet as popular as ever and cryptocurrencies rising in fame, we may never see the end of fraud in the investment world.

Unfortunately, social media has given fraudsters ample opportunity to reach people who may fall victim to their ploy. 

Here’s where the fifth law of gold comes to play. Like its predecessor, it brings a warning.

It acts as a check to our impulsiveness and our eagerness to make wealth in a short time.

It tells us not to have impossible ideals when it comes to investing, not to get into a business we have no experience in, and to be wary of anyone who approaches us with a proposal.

Getting rich through legitimate means is a process that takes time.

Also, you should guard your savings at all costs. 

While it is hard, here are some ways to detect scam investments:

  • They promise immediate reward with little sacrifice.
  • There’s often a deadline to pressure you into investing.
  • The scammers seem to come out of nowhere.
  • They may have ‘witnesses’ they flaunt to seem genuine.

Frequently Asked Questions

What are the 7 cures for a lean purse?

The first law of gold is the major emphasis on the third chapter of the book, ‘the 7 Cures for a Lean Purse,’ and this is the first step to financial independence.

The seven cures for a lean purse are as follows:

  • Start thy purse to fattening.
  • Control thy expenditures.
  • Make thy gold multiply.
  • Guard thy treasures from loss.
  • Own thy own home.
  • Insure a future income.
  • Increase thy ability to earn.

The Bottom Line

In a nutshell, the 5 laws of gold teach us to save, invest wisely, get good advice, be cautious and avoid what seems to glitter.

As you set out to build wealth and check off those financial goals, keep these words to heart and put them to practice.

It is not enough to just learn; it needs to become a part of your day-to-day life.

Start by putting away 10% of your next income for yourself.

With time, you’d get enough to invest and multiply your money.

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