By: Dr. Sunday Adache; Managing Director/ Principal Officer;
PKF corporate; Contact: admin.lesotho@pkf.com +266-22329799
THE THIRD LAW OF GOLD
We have examined the first two laws of gold, today, we shall progress to the third law of gold in this article. The “Third Law of Gold” comes from George S. Clason’s “Five Laws of Gold” being principles of wealth accumulation and financial wisdom. The third law states:
“Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.”
This means that wealth grows and is preserved when it is invested carefully and with the guidance of experienced and knowledgeable people. It encourages seeking advice from those who understand money, investments, and risks, emphasizing the importance of cautious and informed decision-making when it comes to finances.
Information Age Relevance
In our information age, technology enables us to get information at blazing speeds, and almost everyone is connected to the internet. There is so much information available online, proposing solutions to virtually every problem. There are many people marketing professional skills as entrepreneurs, financial advisors, investment firms and banks to investment product manufacturers, it is challenging to choose from the lot the wise and trustworthy candidates capable in providing quality service in handling money.
According to H.B. Smart he was taught “No one watches your money the way you do”. Within the limitations of one’s expertise in financial or business management, we have to seek mentorship as well as professional services. The category of professional where you are assured of a fiduciary relationship, a relationship of trust. This means finding someone you know, and trust. Who will look after your money in the same manner you would, with the same values, business principles, and ethics that you have.
Application of Financial Prudence
How do we make wise investments or good money decisions? In the book “the Richest man In Babylon” there is a story of a money lender who is providing advice to a young man that just received a windfall. His sister wanted him to lend the money to her husband who dreamed of being a wealthy merchant. After his discussion with the money lender who told him the many stories of failed loans, the reasons behind the defaults and the lesson he had learned, our would be investor decided, while it would be noble to help out his sister and her husband, it really wasn’t a wise investment because he was without experience or knowledge working as a merchant. The investment would be rather risky and there was greater risk to lose his money.
Examples of Application of the Law
Another example in the book is that of the early days before our hero, Arkad, became the richest man in Babylon. When he was just starting out working as a scribe, he liked watching what came with wealth. He decided to make himself a guest at the banquet table of the wealthy. Arkad looked for and found a wealthy mentor. Arkad had asked him the secret of his wealth and he shared with him the first law of gold. Then challenged him to save a 10th of his earnings.
Arkad took up the challenge and soon a year had passed. Arkad found an investment partner, the brick maker, and they had formed a plan to make money by buying jewels from Venetians. They planned on reselling them for large profits. However, it turned out they were sold bits of colored glass and not jewels. When Arkad’s mentor returned to see how he was doing, he just laughed at him proclaiming every fool must learn. Then he instructed Arkad to start over and he would check back with him.
Options to Gaining Experience
Sadly, there is no shortcut to learning how to be wise with money. We all have had bad investments and we all at some point have made bad money decisions. It is a part of the learning process. If you can learn from others’ mistakes it helps you avoid the pit falls, the lessons are too many and variant for you to learn from personal experience. And some experiences may take you to a land of no return, therefore make reading and having good mentors as part of your travel path. Part of being a cautious owner is taking the time to understand the mechanics of money or an investment and how it works. Gaining experience and knowledge help you apply what you have learned. It is said that good decision is a product of experience and experience is a product of bad decision.
Cautious Guiding Steps for Money Matters
- Create and live by a budget – This will enable you follow the First Law of Gold.
- Have an emergency fund, three to six months of expenses of cash on hand in the bank.
- Before spending or investing any large sum of money, sleep over it. This will help you avoid making an ill-informed impulse purchase.
- If the deal sounds too good to be true – it’s probably not true.
- Can you easily and logically understand the investment or business process? How it works, how it makes money, how to get paid, and explain it to a complete strange so they understand it too?
- Does the investment or business fail any part of the five laws of gold?
- The litmus test – if you’re still unsure, ask your mentor or trusted advisor to look at it with you.
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