Make Thy Gold Multiply

Now that you are controlling your expenses and continuing to set aside 10% to pay yourself, it is time to put your 10% to work.  The discipline we have learned by controlling our expenses and paying ourselves 10% of our earnings is a major factor in the wealth building process. Because it is the gains on the 10%, that will ultimately build your fortune.   1

Establish An Emergency Fund

I believe that before we begin investing that we create an Emergency Fund.  An Emergency Fund has two components.  The first is to build the fund to $1,000.00 to cover the unexpected expenses that arise outside of your budget.  And you should do this as soon as possible.  The next component is to grow the fund to have three to six months worth of your living expenses as defined by your budget.  Once your savings account has grown to that level, then, and only then should you begin investing in other types of wealth building methods.

Your Wealth Grows by the Magic of Compound Interest

Your emergency fund should be left untouched as you explore and consider other investment plans to begin multiplying your money.  Wealth increases by making wise investments over the years, and consistent growth realized through the magic of compound interest.

Invest In Only Things You Know

Here is a crucial principle, invest in only “things” you know.  There are many investment options available but to invest in anything that you do not have a knowledge of could be a mistake.  There are stocks, bonds, commodities, annuities, mutual funds, certificates of deposit (CD’s) and the list goes on.  We should not invest in anything we do not completely understand.  Also, we have to figure out that there are no “fool proof” investment options, and there must be a complete understanding of what can go wrong and how you can get your money back should the investment opportunity go South.

Don’t Put All of Your Eggs in One Basket

One of the key points to minimizing the risks is to diversify by placing your investment funds into many different areas.  Diversification is a term that means don’t put all of your eggs in one basket.  Diversification can minimize the losses associated with the ups and downs of the marketplace.

Compounding Interest the Key to Building Wealth

Remember the “rate of return” on each investment is essential to the wealth building process.  Invest your money in ways that will ensure your investments will multiply by taking advantage of the compounding interest we earn from our investments.  Compounding interest is the key to making our wealth multiply.

Earnings on Investments Grows Wealth

Arkad said, “The gold we may retain from our earnings is but the start.  The earnings it will make shall build our fortunes.”  So the third lesson teaches us to put our money to work so that it may produce a “stream of wealth that shall continuously flow into thy purse.”

In Lesson 4 Clason teaches us how to guard our “treasures against loss.”  It entails the importance of protecting your money from loss by seeking wise counsel and using their wisdom to protect yourself from unwise investments.  Go to the blog post entitled “Guard Thy Treasures From Loss.”

### Larry Marvin
LifeCrafter – Money $ense

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Guard Thy Treasures From Loss

George Clason uses Arkad, one of the main characters of his book The Richest Man in Babylon to continue the discussion about the cures for a lean purse. In lesson four,  Arkad tells the men who have gathered to listen “the first sound principle of investment is security for thy principal.”  1  

Know the Risks Before You Invest

Arkad explains that the temptation to invest in opportunities that have large earnings potential may be hard to pass up but, he said, “the penalty of risk is probable loss.”  Any knowledgeable investment advisor will tell you that risk and return are important considerations for every investment.  The more risk you take can mean a higher return on your investment, while less risk will mean lower returns but greater safety.  So no matter what investment option you choose, make sure you know the risks before you invest.

Always Seek Counsel From Experts

You should only invest in things that you know and understand. Ask yourself “what is my objective for this investment?”  Don’t rely on your knowledge but seek counsel from experts in the area of the investment you are considering.  Let the wisdom of “others” experienced in investing guide you.  They can help protect your treasure from risky investments.

There Are Risks With Every Investment

Whether you make money or not on your investments depends on how well your investments perform. There are risks with any investment but having a good understanding of each investment and the risks involved significantly increases your chances of picking profitable investments.

Avoid “Get Rich Quick” Schemes

Arkad admonishes his audience to careful study and research to ensure, as much as possible, that you will get your investment back.  He stresses the importance of investing only in things you know and do not invest in “get rich quick” schemes.

Personal Loans to Others Are Risky

And finally, in this lesson, Arkad briefly discusses a principle regarding the loaning of your money to other people.  It is very simple, if you make a loan to someone,  make sure they have the ability to pay you back and the reputation for handling their money well.

Please join us for lesson five as George Clason, through Arkad, the Richest Man in Babylon, teaches us how to make our house a profitable investment. 

###Larry Marvin
LifeCrafter – Money $ense

 

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Controlling Your Expenses

In lesson two, George Clason describes the second skill that is necessary to build a firm foundation to becoming the wealthiest person possible. The first is to  “pay yourselves first,” and the second involves “controlling your expenses,” or in other words, learn how to live below your means.  1 2

Advice on Spending the 90%

After paying ourselves the first 10% of our earnings we live on the other 90%.  We must now make the best use of our money possible which means we must control the money we spend on everything else.  Clason gives us some advice as it relates to spending the 90%.

Needs vs. Wants

Needs vs. Wants
Needs vs. Wants

We have to define the difference between “needs” and “wants.”  If we are not careful, what we all call necessary expenses will always grow to equal incomes unless we clearly understand this concept.  The key is to study your lifestyle and reduce costs or eliminate them totally if possible.  We should reduce our expenses to a level of needs only and live only on the 90% and do not touch not the 10%. 

Make a Budget

Make a budget and write down all of your expenses.  Dave Ramsey says, “A budget lets you decide what is worth spending your money on.”   If you want to “fatten your purse,” you must establish a budget.  

Budgets Show Where Your Money is Going

A budget will help you to take control of your money by identifying how you have spent money in the past, and will keep your money from going where you don’t want it to go in the future. Your budget will help tell you exactly where the money goes, will enable you to pay your necessary expenses, and to pay for wants without exceeding 90%, leaving the 10% to grow your wealth.

Learning to Earn More Money is Our Best Offense

Our best offense, to use a football analogy, is our ability to earn money.  Growing our wealth by using a budget to control our spending then, is the defense we have in building our wealth.

A Budget Will Help Identify Misspending

Budgets will help you identify the leaks in your purse.  Manage your expenses to have money to pay for your necessary expenses, to pay for wants without exceeding 90%,  leaving the 10% to grow.

Lesson 3 Teaches How to Make Your Money Grow

In Lesson 3, “Make Thy Gold Multiply,”  Clason discusses building our 10% by the magic of compound interest and sound investing principles.

### Larry Marvin
LifeCrafter – Money $ense

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