My last blog introduced Seven Cures for a Lean Purse, a series of truths for building and keeping wealth contained in The Richest Man in Babylon, a series of parables written by George Samuel Clason beginning in 1926. This is the second of three articles, the first of which introduced the first three cures for a lean purse and this article presents the next two cures. As previously indicated the cures have relevance to both individuals and business owners.
The Fourth Cure – guard thy treasure from loss. There are two components to this cure. First, ensure that your principle is secure from loss. Exercise care when seeking larger returns that you don’t risk losing the principle. Don’t let the emotion of potential gains override your research and due diligence. Second, seek advisors with considerable experience and a record of successful performance in the area you are considering investing. There is a saying common in the medical community that the physician who treats himself has fool for a patient. The application to the fourth cure is the danger of being too confident in your own ability to assess the risks associated with various investments. Rather, follow the advice of our teacher Arkad to “secure the advice of those experienced in the profitable handling of gold (investments). Let their wisdom protect thy treasure from unsafe investments.” This is particularly important for a business owners should they implement previous recommendations to diversify investment outside the business.
The Fifth Cure – Make thy dwelling a profitable investment. Part of the American dream is to own your own home. Home ownership has several advantages over renting. Home owners usually have yard space that can be used for vegetable or herb gardens, fruit trees or grape vines and safe play areas for children. The greatest advantage is that of eventually paying off the mortgage and actually owning a piece of property. Compare ownership with paying a rental agent and having nothing to show for potentially years of payments. In the world of business, this is analogous to owning your own business verses having a J-O-B. As a business owner, you reap the rewards of operating a successful endeavor whether it be the provision of a service or sale of a product. If you develop a legacy business, you can also benefit from the sale of the investment you have built over the years whether that transition be to your children, employees, a competitor or a strategic buyer. In other words, you have something to show for your efforts when retirement looms. As an employee, you have the security of a stable income, you avoid the risks associated with growing a business, but other then what you may have set aside in your 401K or IRA, there is no future grand rewards at retirement. I am a proponent for every “employee” developing a home based business to serve as source of alternative income and a training ground for developing business acumen.
There is no great secret to the accumulation of wealth. It simply requires the disciplined adherence to a set of principles. This article has explored two of these principles – cure four, protect your investment principle and cure five, establish a business of your own. The next article will cover the remaining two principles of Seven cures for a lean purse.