Wealth Creation: The Three Simple Laws

Not many people think about wealth creation. People are more concerned with how to get rich, so that they can afford bigger and better things.

It’s not the fault of an individual, financial literacy is not taught in schools. Our first relationship with money is watching our parents and what they taught us.

People make more money so that they can spend more money, enslaving us to what money can buy. It may be human nature but we focus on short-term thinking. This may explain why so many people are stuck in a 9-5 job with barely anything to their names when they retire.

Instead on focusing on what money can buy us, we should rather focus on what money can do for us. Whether it is to retire earlier, not work a full-time job or pursue an interest, money can buy you time. That is the difference between the rich and wealthy.

You see, many people can be rich. You can achieve this milestone by working extra hours or getting a higher paying job. The problem with this is that you have to trade your time for money.

You may have heard that the young are money rich, but time poor and the old are time rich, but money poor. Wealth is when you are both money rich, and time rich.

I like many, only thought about money as a means to purchase things but not what it could do for me. I recently re-read a book I read a few years back by George S. Clason – The Richest Man In Babylon.

Here I would like to share with you 3 simple laws or lessons I took from this book that will help you on your journey to wealth creation.

Law #1 for Wealth Creation

“Part of all that you earned, is yours to keep.”

-George S. Clason – The Richest Man In Babylon-

The first law for creating wealth is knowing that you need to pay yourself first. That means putting aside a set amount from your pay weekly, monthly or yearly into your own pocket first.

Arkad who was The Richest Man In Babylon explains to those seeking his advice on creating wealth was to save one tenth of all you earn.

If there is one thing you take away from this part, is the wise words from Arkad. Many of us spend what we earn first, and save whatever is left over.

In most cases, what is left over is pittance to what was earned. There is also the likely chance that there is nothing leftover to be saved.

Depending on what you set out to achieve, 10% savings might not be sufficient. But to others, 10% might be all that they can save.

The importance of this lesson is not how much you are saving. But rather that you are saving, and doing it religiously. Obviously the more you can set aside, the more meaningful the result will be.

The first part of wealth creation is to pay yourself first. You would find it surprising that paying yourself first will have little affect on your ability to pay for your daily necessities.

“Part of all I earn, is mine to keep” . It is a phrase worthy of being repeated daily.

How is wealth to be created, when there is nothing left over?

Law #2 for Wealth Creation

“…and spend no more than nine-tenths of all you earn.”

-George S. Clason – The Richest Man In Babylon-

The second law of wealth creation is to ‘control thy expenditures’. It sounds simple enough and yet so many people forget about it or ignore it completely.

Everybody knows how to add and subtract. However, when it comes to their finances simple mathematics is long forgotten.

If you earn $1000 and you spend $1001, you now owe somebody $1. Every extra dollar that you owe somebody is keeping you from creating wealth.

This is not necessarily the fault of the individual alone. Capitalism is great, it grows an economy and creates productivity. Without it, we would be a far poorer country.

But capitalism is in the business of making money, and if there is a demand a product will be created. Enter credit cards, loan products and more recently buy now pay later (BNPL).

These financial products allow individuals to spend more than they earn. It’s alot easier now when everything is digital and no physical cash is ever being handled. It doesn’t take much for someone to get into a debt spiral.

It’s important not to confuse your desires with your needs. Borrowing money to purchase things that you want is borrowing a little time off your future. Whereas saving extra is giving a little more time for your future.

Staying within your limit and not spending more than nine-tenths of all you earn will keep you on the right track of wealth creation.

How is wealth to be created, when you spend more than you earn?

Law #3 for Wealth Creation

“..put each coin to labouring that it may reproduce its kind even as the flocks of the field and help bring to thee income, a stream of wealth that shall flow constantly into thy purse.”

-George S. Clason – The Richest Man In Babylon-

Laws 1 and 2 is not complete without Law 3 for wealth creation. If by chance you only follow the first two laws, you will be better off than a majority of Australians. However, you will not be able to create meaningful wealth.

Wealth is not the money in your wallet (bank account these days), but the income that is built from that money. It is a stream of income that flows continuously into your bank account, an income that continuously comes whether you work or travel.

To complete the set of the Simple Laws to Create wealth, Law 3 is equally important. You now have managed to save one-tenth of all you earned and spend no more than nine-tenths of all you earned.

How therefore can we put our money to work?

Law 3 is to multiply all that you saved. You will never grow wealthy by just your savings alone. In order to build a great nest egg, an individual must invest.

Your initial savings of one-tenth must be put to work for you. For simplicity sake, a dollar invested will earn a return of 10% which is ten cents. That ten cents will then go one to earn you 1 cent. And you will repeat this process with that 1 cent.

Eventually you do this for long enough, that dollar will be 2 dollars, that 10 cents will be a dollar, and that 1 cent will become 10 cents. If you continue to do this for a considerable amount of time. Wealth beyond your imagination will greet you happily.

How is wealth to be created, when it does not multiply?

Key Takeaways

• Save a portion of your income, it is yours to keep.
• Control your expenditures and spend no more than what you earn.
• Make your money work for you and multiply. Invest in assets that produce income and appreciate in value. Compounding is an investors best-friend.

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