Perhaps the most important book i have ever read in my financial journey.

The Richest Man In Babylon.

I have read a lot of books when I was starting my investment journey, big big thanks to the neighborhood library, where wisdom of all sorts, in different genre can be found in written form.

From REITS investing in the local section, value investing, growth investing, trading, reading annual reports, financial reports, how to look for fraud, books that focus specifically on ROE, PSR, P/B, P/E etc and many many more. I cannot emphasize enough that reading is a very big part of investing, in all stages, and even if you are already a veteran in investing, you still have to keep on reading, the annual reports, financial reports of companies that you have invested in.

But first of all, before we start on our investing journey, we have to learn how to manage our money.

We do know that we need to save our money from a very young age, the rich will teach their offspring the importance of money and how to preserve their wealth, while the poor will also teach their offspring the importance of money through their own experience and plight. Parents will teach their children to save money for a rainy day, regardless of their own education level, their own savings rates, or their uncontrollable expenses.

The question is how much, how early, and what differences will it make?

Does saving 10% your whole life from all the money you have collected make a big difference and allow you to pursue the life you want at an earlier stage?

No, a person who have not saved a single cent in his youth, but 50% in his prime earning years, and invest his money wisely and steadily will have a lot more towards the end.

So does it mean we do not have to save since young?

No again, if you do not learn how to mange small amount of money and manage it well, how do you think you will cope with big amount of money?

Some good example which I always like to bring up, are the NBA players and the big lottery winners. The NBA players are extremely talent in their own crafts, and the sports are well liked across many countries, many basketball players around the world have given their whole life to basketball and their achievements can’t even match up to the second tier standard in America , and the lottery winners are some of the luckiest people in the world, until the money started to control them.

Starting young and starting small, might not play a very big part in terms of the amount of money, but never underestimate, the amount of understanding you will amassed along the way in understanding yourself and the investing environment which you wish to be in. You can go into trading, and learn about the importance of stop loss, or your character can be more suitable for a balanced portfolio, which you dabble in bonds, precious metals and stocks. You could perhaps be more interest in emerging markets than your local market, or in the US market, where the P/E ratio can go into the thousands for companies that the whole world has high hope in. Or the dividends focused/ REITS group which is more interested in the amount of money they are getting out from their portfolio each year, or every month. Perhaps a contrarian, a value investors, or solely property investor.

It is always about understanding yourself, your temperament, starting with small amount of money, making mistakes along the way, and slowly picking yourself up, and finally finding a steady path to your investment journey, there are many roads that leads to Rome, some faster but riskier, some slower but steadier.

In the end, it is about reaching your destination, regardless of how far or near, how slow of fast, if you take into consideration, the amount of people not reaching the end destination. To reach, you would have already won over the mass majority.

Lets bring us back to money mangement, the important rules we can take a leaf from The Richest Man In Babylon.

7 golden rules.

1. Start thy purse to fattening – For each ten coins i put in my lean purse, to spend but nine.

In today context – Pay yourself first. Do not save what you have left, but save first then spend. Normally in your prime earning years, the expenses are often the greatest too, as it coincides with getting married and having a child or children. For the singles, some of the biggest expenses in life like getting that car, or investment property, being filial piety and contributing more to your parents allowance, going for your yearly holidays. There will always be something to buy, which bring us to our next rules, but before that, pay yourself first.

2. Control thy expenditures – Budget then thy necessary expenses. Touch not the one- tenth that is fattening thy purse. Let this be thy great desire that is being fulfilled. Keep working with thy budget, keep adjusting it to help thee.

There are many good points in the second rule, and for anyone that is interested, you can purchase the e-book online, or visit your local library.
In today context, this is perhaps one of the hardest rule in all the seven rules, yet we do have to be responsible to our money, to tell ourselves that we should control the money, and not let the money control us. For most if not all job, we are trading time for money, for top athletes, soccer players, basketballers, most retire in their 30s, while they are past their prime for that particular sports, their life have just entered into their prime. With reducing income, can they reduce their expenses proportionally too? Or their expenses will increase with higher upkeep to their image, and ego?

3. Make thy gold multiply – Behold, from my humble earnings I had begotten a hoard of golden slaves, each laboring and earning more gold. As they labored for me, so their children also labored and their children’s children until great was the income from their combined efforts.

Some people are better at managing money, some are better at investing, while some are better at earnings, and some lucky few who are good at multiple aspects if not all. No matter what, there is a common goal, to multiply our savings(idle money) Before we start to invest, please set aside an emergency fund, as it is hard to predict the short term fluctuation of any investing environment, or to predict that black swam event like covid19, that seems to be happening more frequently ,a black swam event is not that uncommon after all.

Investing is a personal journey, you can seek help, go to classes, or stand on the shoulders of giants, but ultimately you are solely responsible for the rise and fall of your investment values, not the someone who told you about one particular stock that is sure bound to rise, or that hot hot stock where all the people you know have put in some money and are enjoying the first wave of a rising tide brought on by the rising liquidity that is flooding the market.

Before you invest, what is the definition of the stock market to you? How do investors earn money from the market, and what do business owners have to gain from listing in the stock market, understanding these fundamental issues will make you understand your path, whether you are more attracted into dividends investing; one of the best way to partake in the business profits, or that cash rich, yearly increasing book value company that refuse to return back any money in the company to shareholders, waiting for years for other shareholders to push up its price, and only after you have sold your holdings after losing all hope in the company to realise its value, then it’s stock price rises dramatically after that. There are many reasons why a stock price will rise or fall, many reasons worse than the others, and on hindsight, the vision is often perfect, but not when you are prodding forward.

We have come to the end of this lengthy and wordiness post, there are 4 more rules to this series, which I think are slightly less important to the first 3 rules but if you wish I highly recommend you to borrow or purchase the book for a good old reading, you will not be disappointed.

If you mastered the first 3 rules, I think you are set for a relatively successful investing journey, yet the first 3 rules are often the hardest due to individual temperament. For money management and that a-ha book, the financial camp are often divided into two major camps, one of which is The Richest Man In Babylon & Rich Dad, Poor Dad by Robert Kiyosaki, with most preferring the latter, both are great books, which will set a strong foundation in your financial literacy journey.

Last but not least, i would like to add in some personal words which I feel strongly for.

Savings is more of within, while spending is more shown externally. In life, almost everywhere we are more judged by our spending powers, countries are listed by their spending powers. And it is true, by how spending and powers comes together naturally to form a phrase, spending do give us powers, and make us feel in power, it is a very very fine and delicate process, one misstep and we are lured into this false sense of power, which vanish into the thin air when our money are gone. The whole world is chasing after money not you. Take good care of your money, and be in control of it. It is easier for others to judge you by the clothes you wear, the car you drive, and the house you stay in, and very seldom will people know how much you have in savings unless you wish to reveal so. Spending is essential to the economy and savings is essential to your personal well being, it is a delicate balance with no right or wrong. Remember there are many paths that lead to Rome, and it is not how fast you reach it, but whether you will reach it. In the meantime, do enjoy the journey and not be penny wise and pound foolish. It is perfectly fine to buy the things that you fancy from time to time, but always spend within your means.

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