We live in an impatient age, and when it comes to money we want more of it now, today, not tomorrow. Whether it's a deposit for a mortgage or clearing those credit cards that sap our energy long after we stopped enjoying what we bought with them, the sooner the better. When it comes to investing, we want easy pickings and quick returns. Hence the current mania for crypto-currencies. Why invest in nanotechnology or machine learning when Ethereum is locked in an endless upward spiral and Bitcoin is the gift that keeps on giving?
A century ago, the American writer George S Clason took a different approach. In The Richest Man in Babylon he gave the world a treasure trove – literally – of financial principles based on things that might seem old-fashioned today: caution, prudence and wisdom. Clason used the wise men of the ancient city of Babylon as the spokesmen for his financial advice, but that advice is as relevant today as it was a century ago, when the Wall Street Crash and the Great Depression were looming.
Take for example, the five laws of gold. If you are looking to place your personal finances on a sound footing, wherever you are in life, these are for you:
Law No1: Gold comes gladly and in increasing quantity to anyone who puts by at least a tenth of their earnings to create an estate for their future and that of their family. In other words, save 10% of your income. Minimum. Save more than that if you can. And that 10% is not for next year's holiday or a new car. It's for the long-term. Your 10% can include your pension contributions, ISAs, premium bonds or any kind of high interest/restricted access savings account. OK, interest rates for savers are at historic lows now, but who knows where they'll be in five or ten years? And compound interest means your savings will grow faster than you think.
Law No2: Gold labours diligently and contentedly for the wise owner who finds profitable employment for it. So, if you're looking to invest rather than save, do it wisely. No crypto-currencies or pyramid schemes. We're focusing on the words “profitable” and “employment”. Make your money work for you but remember the best you can hope for this side of the rainbow is steady returns over the long term, not lottery wins. In practice this is likely to mean shares in established companies offering a regular dividend and a steady upward trend in share price. You can invest directly, or through a fund manager in the form of unit trusts, but before parting with a single penny, see Laws 3, 4 and 5…
Law No3: Gold clings to the protection of the cautious owner who invests it under the advice of those wise in handling it. Before you do anything, talk to a qualified, experienced financial adviser. If you don't know one, do some research. Check them out on the internet. What expertise do they have? What kind of clients? Read the reviews. Call them first and get a feel for what they can offer you, then decide if a face to face meeting will work. Check out their commission arrangements. Are they independent or tied to a particular company, under contract to push that company's financial products? A decent financial adviser will encourage you to get the basics in place: pension, life insurance, somewhere to live, before steering you towards investing in emerging markets and space travel. When you're satisfied that you've found an adviser you can count on, listen to them. Trust their advice. But review your relationship with them at regular intervals, say annually, and if you're not happy, look elsewhere. Chances are, if your judgment was sound in the first place, you'll stick with the same adviser for many years to come.
Law No4: Gold slips away from the one who invests it in businesses or purposes with which they not familiar or which are not approved by those skilled in its keep. If you have a deep knowledge of food retail, by all means invest in the supermarket chain that is increasing market share. Likewise, if you work for a company that has an employee share ownership scheme, it makes sense to take advantage of it, if you're sure that your company has good prospects. But, you should never invest in any market or financial product that you don't understand (remember the Crash!) or can't fully research. If you are tempted to try your hand at currency dealing or options trading and you have a financial adviser, talk to them first. If they're not up to speed, ask them to refer you to someone who is. Best of all, steer clear of anything you're not sure about, no matter how big the potential returns.
Law No5: Gold flees the one seeking impossible earnings or who follows the alluring advice of tricksters and schemers or who trusts his own inexperience. Again, the fifth law follows on the heels of the fourth. If you start scouring the internet for financial advice and wealth creation ideas, your inbox will soon be full of “tricksters and schemers” promising you the earth if you'll invest £999 in their “system” for turning £1 into £1XXXXXX on the Chicago Mercantile Exchange. Remember, the only one who makes money in a gold rush is the one selling shovels. Buy the wrong shovel and you'll quickly dig yourself into debt. Not only will you pay through the nose for a system that has no proven value; by following it you will probably lose a lot more than the price you paid for it. At the very least you should check genuine reviews of the product. And never buy any system, investment vehicle or financial product from any company that is not registered by a national watchdog, such as the Financial Conduct Authority for the UK.