Advices from Babylon for Those with Financial Problems

If you are having financial problems or want to have an idea about finance, the first book you should read is The Richest Man in Babylon. Below you can find some summary of the recommendations given in the book.

So let’s start.

You must secure your source of income for your future. Look at the old people, remember that after a while you will be one of them. Invest your savings very carefully so they don’t get lost. Save money so your family can meet their needs when you leave this world. If you make small payments regularly, you will be able to provide such protection. A frugal person would never delay putting aside a large amount for such a clever reason. Consult knowledgeable people for ideas. Listen to the advice of people whose business is related to money. 

Although advice is given for free, it is important to pay attention to what advice is sought from whom. The cost of seeking advice from someone with no experience in savings may be to lose all savings.

A small safe return is always better than risk. High interest rates can cause you to lose all your money. Stay away from them. 

Wealth also grows from a small seed, like a tree. The first money saved is the seed of the wealth tree. The sooner this seed is planted, the sooner the tree of wealth begins to grow. If this tree is fed with regular accumulation, it will have a shade to lie under with pleasure as soon as possible.

Enjoy life while you’re here. Do not force yourself too hard or try to save too much. If you can only keep a tenth of what you earn, be satisfied with that. Do not be stingy while spending. Life is beautiful and full of things to enjoy.

It is necessary to spend only nine tenths of what is earned and accumulate the rest.

Personally, when I started using nine-tenths of my earnings, I didn’t feel like I had less money than before. And soon my money seemed to get more and more. Undoubtedly, the person who does not spend all of his earnings will get money more easily after a while. On the other hand, money escapes from one whose wallet is empty.

What do you desire most? Is it the fulfillment of all your wishes every day, jewelry, better clothes, better food, things that go as easy as they come? Or do you want more permanent things like gold, property, trade, income generating investments? The dollars that come out of your wallet allow you to get the first set of things, and what you leave in your wallet allows you to access the second set.

It is necessary to eliminate unnecessary expenses by making budget planning, so that you do not spend more than nine tenths of the money earned.

What we define as “necessary expenses” increases according to our income as long as we do not make the opposite effort. Do not confuse your desires with real necessary expenses. Each of us desires more than our earnings can deliver. Even if we use all the money we earn to meet our desires, we still have unmet desires. Man’s desires never end. Desires are usually instant pleasures, whereas accumulation helps for a lifetime.

We should make our money work for us. We should increase our savings with investment. 

The first principle of a good investment is the security of the capital. Is it okay to aim for a bigger profit if your capital is likely to be lost? Obviously not. Don’t let your desires to get rich quick get you on the wrong track.

When investing with the money you have saved, take precautions and do not trust yourself. It is much better to take the opinion and advice of those who are used to using money to make a profit. Such recommendations are free and their value is the amount you are willing to invest. Because it will save you from losing that amount of money.

One of the remedies for a weak wallet is to not let your wallet empty after it is full. Only invest your money in ways that your capital is safe and you can get it back whenever you want. Consult the knowledgeable and experienced people for ideas. Their knowledge and experience prevents you from making precarious investments.

Have your own house in a neighborhood where you can pay the mortgage instead of sitting in a rental.

Someone who acts by the rules of wealth should think about the upcoming retirement days, must make fundraising plans and her investment must be safe for years. She should arrange them in such a way that she can easily access the money when she needs to use it.

Look to create an income now for your old age and for your family’s needs.

Generalized goals cannot go beyond weak wishes. A man’s desire to be rich doesn’t make much sense. But a man’s desire to have five grams of gold is a tangible goal, and therefore it is likely to be achieved. After obtaining five grams of gold, he can find 10 grams of gold, 20 grams of gold, and a thousand grams of gold with similar methods, and then he will be rich. By trying to achieve a small goal, he learns to secure a large amount. 

Wealth happens this way: first with small quantities, then more can be achieved with large quantities. Goals must be clear and defined. If goals are too much, too complex, or too difficult to achieve, they will not serve their purpose.

Work by nurturing your own strengths, become wiser, gain more skills, and respect yourself. Thus, you can gain the confidence you need to achieve your carefully shaped goals and increase your earnings.

The wealth that comes quickly disappears in the same way. Wealth that comes slowly brings pleasure and satisfaction to its owner, because it is the product of knowledge and persistent purpose.

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Why Financial Security Is More Important Than The Employment Security

Take Risk

Low risk high return investments can be made. All you have to do is learn how to do it. Remember, when it comes to investing, knowledge always eliminates risk. Learning is not difficult at all. It is no different from learning to ride a bike. You may fall at the beginning, but after a while learning not to fall, investing becomes as natural as walking.

People who haven’t achieved their financial freedom are more likely to avoid financial risk. It is always better to learn to manage risk rather than avoid risk.

Risk takers change the world. You can see very few people getting rich without risk. Many choose to depend on the state to avoid the risks of life. At the beginning of the Information Age, the phenomenon of benevolent state has come to an end. We know that. The Benevolent state was costing dearly. Unfortunately, millions of people around the world will be in a very difficult financial situation as they depend on “their rights” and lifetime bonuses. The greatest requirement of the Information Age is that everyone is self-sufficient.

The idea of “work hard and find yourself a solid, secure job” is from the Industrial Age. We no longer live in that age. Times are changing. However, people insist on not changing their minds as rapidly. They still think they deserve something. They believe investment is not their business. They expect the state, companies, unions or their families to take care of them on their retirement days. I wish they were right.

If you have already achieved your financial freedom, I will just say “Congratulations!”. Please help others to follow your path. If they need guidance, do not hesitate to help. Guide, but let them find their own way. Because there are many ways to financial freedom.

Whatever you decide, please keep this in mind: Financial freedom may be free, but it is not cheap. Freedom has a price, it’s worth it if you ask me. The trick is that financial freedom requires neither money nor good education. It doesn’t have to be risky either. The cost of financial freedom is measured by dreams, will, and the ability to overcome obstacles along the way. So are you ready to pay this price?

Assurance or Freedom?

• Go to school, get good grades, then find a solid, secure job.

• Go to school, get good grades, then start your own business.

If all people in the world were given these two options, the results could have been halved. However, people have become so used to the system that they do not know what they want. Even if they know, they don’t have the motivation to bring it to life. After all, many unknowingly find themselves applying the first option.

The reason millions of people seek assurance is actually what they’ve been taught at home and at school.

Most of us are instilled with employment security, not financial security, at an early age. In addition, since we are taught little about money, both at home and at school, what could be more natural than clinging to the idea of employment security?

If you look at people who are poor and have not achieved their financial freedom, you will see that they have opted for employment security. If you turn your head and look in the opposite direction, the rich and the people who have fully secured their financial freedom, you will see that they act with freedom.

Falling into the Debt Trap

The reason why most of the population chooses the first option and works without financial freedom is because of what they learned in school. They get into debt shortly after they finish school. This is such a deep debt that they cling to employment security even more tightly in order to pay their bills.

There are many young people who graduated from university with their diplomas and education loan debt. When they see that the amount of debt is between $ 50,000 and $ 150,000, they get depressed. If the parents covered the tuition expenses, then the parents may have to pay a loan.

An article I read recently wrote that most Americans had credit cards when they were students and would be in debt for the rest of their lives. This is because they took part in a scenario that became famous in the Industrial Age. Here is the scenario:

The boy goes to school, graduates, gets a job, and soon has money to spend. Now he can rent an apartment, buy a TV, new furniture, new clothes and of course a car. One day, this hero meets someone special, they fall in love with each other, and after a while they get married. Life goes easier with a double income. By putting a few dollars aside, they plan to own their own homes as all young people dream of. One day, they find that house, withdraw the money they have saved in their savings accounts, deposit the house down payment, and go under mortgage debt. Well, the new house needs new items, and they enter the furniture store that advertises in talismanic words, saying “Furniture in installments with no down payment”.

Everything is great, they throw a party to show off their new home, new cars, new stuff and new toys. After that, they will live in debt until the end of their lives. Then their first child is born.

Every morning, this ordinary, well-educated, hard-working couple leaves their children at kindergarten, making their way to the company where they work intensely. Now, employment security has become even more important for them.

Do you still insist on choosing the first option?

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The Difference Between A Good Investor And A Bad Investor

Many people invest in mutual funds. When I ask someone, who is investing in mutual funds, he answers: “But I am also investing. I have a portfolio of mutual funds. I also have bonds and stocks. Isn’t this all investment?”.

Yes, saving is also an investment. Buying mutual funds, stocks or bonds is also an investment. But it is the kind of investment a saver would make, not an investor.

Let’s take a look at the passive investor philosophy. Most investment advisors provide a recommendation like that:

• Work hard

• Save money

• Get rid of your debt

• Make long-term investments

• Diversify your investments

This is good advice for a certain group of people – suitable for people with a savings philosophy or passive investors. In today’s circumstances, I believe this advice is riskier than any financial advice. It may seem as a reliable and wise advice to those who are financially inexperienced.

There is only one word to distinguish between a saver and an investor. That word is leverage. Thanks to leverage, you have the ability to do more with less.

Many savers do not use financial leverage. And if you don’t have enough financial knowledge or experience to apply leverage, it would be better for you not to use it. I will explain this to you later. Let’s take a look at these standard recommendations from the perspective of the saver and then the investor.

Work Hard

When many people think of “work hard” advice, they only think about their own hard work. The leverage effect on one’s own hard work is very small. Imagine if others will help you to get rich with their hard work. This is the power of leverage. States do not ask us to seek jobs, but to create jobs. If everybody starts looking for work, economies will collapse. For economies to grow, we need people who can create jobs.

Save Money

The problem with saving money is that the current economic system needs borrowers, not savers, to grow. In order for our economic system to continue to grow, it needs smart borrowers. The system does not need people who get poor by borrowing, but people who can borrow money and get rich. While 10 percent of the people who borrow money in the world benefit from their debts to be rich, 90 percent of them become poor with their debts. And this ratio is getting worse every day.

Get Rid of Your Debt

Many savers think that debt is bad and it’s smart to pay off mortgage loans quickly. And for many people, borrowing is bad and getting rid of debt is wise. However, if you are willing to devote some time to your financial education, you can use your debt to move forward. But if you are considering investing with debt, I would like to warn you once again that you should invest in your financial education first.

There is good debt and bad debt. Being financially smart is knowing when to borrow and when to avoid it.

In these economic conditions, savers are losers and borrowers are winners. For whatever reason, you should always be careful when using borrowed money.

Make Long-Term Investments

Look at this advice in terms of sellers: “Give me your money to keep me for years, and I’ll get certain payments from you over the long term.” The phrase “make long-term investments” is like the advantages that allow you to earn points. You become a loyal customer.

Depending on the payments you make to manage the fund, mutual funds may not earn you as much money as other investments.

Diversify Diversify Diversify

Warren Buffet, considered the richest investor in the world, says this about diversification: “Diversification is a safeguard against ignorance. It won’t make much sense if you know what you’re doing. “

Then the question arises: Whose ignorance do you protect yourself from? Is it your own ignorance or the ignorance of your financial advisor?

Diversification generally means that you should not put all the eggs in the same basket. Warren Buffet puts them all in the same basket. He once said: “Put all your eggs in one basket, but watch your basket carefully.”

Personally, I prefer to focus rather than diversify, and actually the reason I was able to move forward was focus, not diversification.

I saw an acrostic on focus in a book I read.

For many, diversification is a good strategy. This is only because it protects investors from themselves and inadequate advisors.

The traditional financial planning advice “work hard, save money, get rid of your debts, make long-term investments and diversify” is good for the average. This advice is also good for those who are rich but are not interested in learning how to become an investor. Many movie stars, wealthy professionals, or former athletes do that. Just remember that while following this path, you will have a very small leverage.

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Why Accounting Knowledge Is Needed

In 1923, a group of great leaders and wealthiest businessmen held a meeting at the Edgewater Beach Hotel in Chicago. Head of the largest steel company Charles Schwab, president of the world’s largest utility company Samuel Insull, president of the world’s largest gas distribution company Howard Hopson, chairman of the board of International Match Company Ivar Kreuger, president of the Bank of International Settlements Leon Fraizer, president of the New York Stock Exchange Richard Whitney, also two prominent stock market speculators Arthur Cotton and Jesse Livermore, and lastly Albert Fall who is a member of the President Harding cabinet were among the participants.

In twenty-five years, these nine participants somehow came to an end. Schwab died penniless after five years of debt. Insull passed away totally broke, somewhere far from his homeland. Hopson lost his mind and eventually went mad. Whitney and Albert Fall had just gotten out of prison. Fraizer and Livermore committed suicide.

Does anyone know what really happened to these guys? The conditions that prepared the Great Depression and the collapse of the markets must have disastrously affected the lives of these people. However nowadays, we are going through much greater and faster changes. Probably 20-25 years from now, we will see explosions and ruptures parallel to their ups and downs. The real wealth is education, not money. Unfortunately, many people focus on money instead. If these people were open to learning, their wealth would gradually increase as long as they were informed and open to innovations. It is always knowledge that produces money. Money flies away without financial knowledge.

What matters is not how much is earned, but how much money is kept. Most people fail to understand this. Sometimes we hear that a poor person suddenly becomes rich when he wins the lottery, but soon he returns to his poor days. He has millions of dollars, but after a while he returns where he started. Or let’s look at the life stories of professional athletes. Some make millions of dollars in a year by the age of twenty-four. However, when they reach their thirties, we read that they sleep under the bridges.

There is a story of a football player at social media these days. He was making millions of dollars until a few years ago. Now, his friends, wife, lawyer and accountant allegedly took all of his assets. He is living in the basement of an old friend’s house. He is only thirty-seven. He asked help from his old clubs, then his story was featured in media.

In the late 1990s, many people suddenly became rich. Just like the 1920s. People are getting richer, and as they get richer, their greed increases. On the other hand, the poor live more and more miserable.

We hear these questions often: “Where do we start?” or “How can I get rich in a short time?”. Instead of looking for answers to these questions, people should have financial knowledge or basic accounting knowledge to get rich.

If we’re going to build the Empire State Building, the first thing we need to do is dig a deep hole and lay a strong foundation. If we are going to build a house, a 15 cm thick foundation will be sufficient. While most people are on their way to getting rich, they try to build the Empire State Building with 15 cm thick concrete.

Our school system argues that there may still be house construction without foundations. That’s why the floors of the houses are still soil. Hence, when students graduate from school, they lack financial basis. Finally, living paycheck to paycheck, they decide that the only way to find a solution to their financial problems is to get rich as soon as possible.

Skyscraper construction begins. Construction progresses rapidly. Soon a curved tower appears, not the Empire State Building. Sleepless nights come back then.

Accounting is perhaps the world’s most boring subject. It can also be called very confusing. However, if we want to get rich and keep it for a long time, the most important issue is accounting. The point is how to learn this boring and confusing topic. The answer is that; with simplifying.

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