Introduction
This book teaches the fundamentals in how to get wealthy. It is an introduction to personal finance with some simple and effective steps to follow. It is an old book published in 1926 but the lessons are just as relevant today as ever.
Seven Cures for a Lean Purse
- Pay yourself first: Save at least 10% of your income, more if possible. This money is for the future. Most people won’t even notice having 10% less money.
- Keep your expenses low: Don’t let your expenses grow together with your income. Don’t buy things out of desire, instead only buy things that are necessary. Follow a budget.
- Invest your money: Just saving money is not enough, you need to invest it and have money work for you. This can for example be stocks or index funds. Take advantage of compound interest. Be patient and think long-term. Do your research and invest only in things you understand.
- Protect your money: Start small if you are new to investing. Learn from people who have successfully become rich and the mistakes they have made. Diversify your investments and manage your risk. Avoid “get-rich-quick” investments because you will most likely lose money from them.
- Own your house: If you plan to stay in the same city for a long time then it is better to buy a house instead of renting.
- Plan for retirement: Have a plan of how much you will need to live comfortably in the future.
- Increase your ability to earn: Invest in yourself and keep learning new things. Acquire new skills and knowledge so you can provide more value. This way your income will also grow.
The Five Laws of Gold
Gold goes to those who follow these five laws:
- Gold goes to people who save at least 10% of their income.
- Gold stays with people who who invests it so it can multiply. Think long term and take advantage of compound interest.
- Gold stays with people who look for advice from other financially successful people.
- Gold leaves people who invest in things they don’t know.
- Gold leaves people who have unreasonable expectations and force impossible earnings. This is for example “get-rich-quick” investments.
General Advice
Saving and investing is a learning process and you will become better with time.
Don’t risk everything on one investment and if it fails you lose everything. “Better a little caution than a big regret.”
If you want to be financially successful then spend time around and learn from people who are financially successful. Do things that are proven to succeed.
Don’t procrastinate. Take opportunities when they arrive without hesitation. The harder you work the luckier you get. People who take action are favoured by luck.
Set up a well thought out plan and stick with it. Money increases quickly and debts are gone quickly with discipline and consistency.
Build for yourself a mountain of gold first, then you can enjoy as many banquets as you wish without worry. Don’t spend your money as soon as you earn it.
Lend money only to people who you trust and that you will pay you back.
Create an emergency fund in case a sudden expense or unexpected event come up. For example a medical bill or getting fired from the job.
Avoid getting into bad debt that takes money from you. A person who spends more then they earn only sets themselves up for failure. People who are in debt are never truly free and it will reduce the quality of your life. If you are in debt then save 10%, pay of you debts using 20% and life using the remaining 70%.
Hard work attracts money, opportunity, friends and like minded people. Decide what you want in life and then make yourself like to work. “Hard work is the best friend I’ve ever had.”
