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´Richest Man in Babylon´ Offers Money Management Advice

Eric Frederick |

Last year, I had more time available to read, so I endeavored to broaden my base of knowledge by sampling various management books. I also took time to explore the self-help aisle.
As we start this new year, I would like to recommend a small but powerful book to American Laundry News readers. It’s called The Richest Man in Babylon, written by George S. Clason. This simple 144-page book reportedly contains the money management secrets of the ancients.
I originally found this book as a newlywed back in 1970, and while I found its ideas to be interesting, the formula for financial success that was laid out seemed too simple to be believed. Thirty-three years later, I have become a true believer of the basic financial rules described in this book.
For those of you close to retirement or for those who have many years to go, the financial principles laid out in The Richest Man will help you improve your future or secure for you a comfortable retirement. For those of you who are not ready to invest $6.99, I will highlight some of the principles Clason writes about.
The first rule to financial freedom is to pay 10% of your income to yourself first, the book advises.
I have always taken pride in paying all my bills on time, but there have been times when paying all my bills took all the money I earned.
I learned the sad fact that wants, needs and desires expanded as quickly as my pay. When I decided to pay myself first and learn to live on the rest, I began to really enjoy life.
I decided to take advantage of my company’s 401k program. My employer was willing to match 50 cents on the dollar up to 5% of my salary. By putting 7.5% of my pretax paycheck into the program, I was able to save 10% of my income.
This is a great long-term saving program but we all need to have access to extra cash every once in a while. So, I started regularly putting an extra 10% of my paycheck directly into my credit union account. It was amazing how fast the money added up, and how great I felt as the balance grew.
My wife and I learned to live on the remaining 80%. We tried to watch our expenses and make sure that we stayed within our spending limits. It was difficult at first but after a little practice, it began to come naturally.
We put no restrictions on where or how we spent this 80%. We were free – after paying our regular monthly expenses – to spend any extra cash on trips, clothes, movies or other luxuries we desired. The idea is not to forgo the fun things in life but to pay for them out of your 80%.
Profitably invest your savings, Clason cites as the second rule. The concept is to put your savings to work so that it can increase without risking the principal. As the years pass, it multiplies in surprising fashion.
Third is that money clings to the protection of the cautious owner who invests it under the advice of men wise in its handling.
You have worked hard for your money, and you want to protect it. You also need for it to go to work for you so that it can earn a respectable rate of return. Thus, it is necessary to seek the advice of professionals in how to invest money in profitable ventures that ensure the safety of your savings and its return.
The fourth rule, Clason writes, is that money slides away from the man who invests it in businesses or purposes with which he is not familiar, or which are not recommended by those skilled in investing.
Finally, Clason says that money runs away from the man who forces it to impossible earnings, who listens to the alluring advice of con artists or who trusts it to his own inexperience and romantic desires for investment.
During the Clean Show in Las Vegas this summer, I watched many people try their hand at the various gaming tables. I know for a fact that the odds always favor the house. These odds guarantee the house will receive a predictable portion of all the money bet there. It is, therefore, an unwise location to take one’s money with the thought of trying to make it grow.
Similarly, the lottery, with its tempting commercials and large payoffs, is not a sound place to invest one’s money. If the deal being offered to you by a friend seems too good to be true, then it is not true.
The simple fact is that there are no shortcuts to accumulate wealth. The most valuable commodity we have in attempting to build wealth is time, which is given to all of us freely and equally. A person who disciplines himself to pay himself first (at least 10% of his salary) on a regular basis will learn the value of time and, with it, the true value of money.
The important thing to remember is that it is never too late to start investing in your future.

About the author

Eric Frederick

Carilion Laundry Service

Director of Laundry Services

Eric Frederick is director of laundry services for Carilion Laundry Service, Roanoke, Va., and past president of the National Association of Institutional Linen Management (NAILM), now called the Association for Linen Management (ALM). He’s a two-time association manager of the year. You can reach him by e-mail at efrederick@carilion.com.

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