The Richest Man in Babylon - Review

For those that have not had the pleasure of reading The Richest Man in Babylon I highly recommend it. The book is extremely simplistic in it's approach to wealth building, but sometimes the simplest things are the most effective. The book was first published in 1926 and was written by George S Clason. It is 160 pages of pure joy. The book has several parables that tell the stories of various people in ancient Babylon. The text is written in the form of the bible and this should be the bible by which all junior wealth building followers should worship.

The basic premise of the book is pay yourself 10% of your income. No matter what happens keep this 10% every pay check and invest it. That money will become your slave and bare children. Those children will also become your slaves and so on and so on. Original, "No". Complex, "No". Highly effective, "YES!!!". This should be mandatory yearly reading in every middle school / high school in America.

Using an ancient civilization and writing in the 1920's Clason makes a balls on statement about wealth and society. He basically states that no society can be rich and prosperous unless it's people are also rich and prosperous. With our current debt ridden, recession bound economy could anything else be more true.

Below is the table of contents along with the Seven Cures for a Lean Purse and The Five Laws of Gold. Please drink from this well of financial wisdom.

Table of Contents
The Man Who Desired Gold
The Richest Man In Babylon
Seven Cures for a Lean Purse
Meet the Goddess of Good Luck
The Five Laws of Gold
The Gold Lender of Babylon
The Walls of Babylon
The Camel Trader of Babylon
The Clay Tablets from Babylon
The Luckiest Man in Babylon
An Historical Sketch of Babylon

The 5 Laws of Gold
Gold cometh gladly and in increasing quantities to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.

Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

Gold clingeth to the protection of the cautious owner who invest it under the advice of men wise in its handling.

Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.

Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.

The 7 Cures to a Lean Purse

FIRST CURE: Start thy purse to fattening.
The stream of money that flows into and out of one's life is immense. Wealth and security can be secured from it, but only if portions of that stream are diverted. Time and again, the book's "enlightened" characters stress saving at least ten percent of your income every month, without fail. Accomplish this by setting aside that ten percent before all other expenses are considered.
"But when I began to take out from my purse but nine parts of the ten I put in," Arkad said, "it began to fatten. So will thine."


SECOND CURE: Control thy expenditures.
The amount of money a person makes is important, but it is secondary to the degree to which that person controls his expenses. Budget and plan your expenses earnestly. Demand value for the dollars you spend.
"That what each of us calls our 'necessary expenses' will always grow to equal our incomes unless we protest to the contrary," Arkad stated. "Confuse not the necessary expenses with thy desires."

THIRD CURE: Make thy gold multiply.
Three words: interest, interest, interest. Take care to see that all saved monies are kept in the highest-yield interest-bearing accounts available. If you have the experience and education to do so, invest a portion of your money by other means, always striving to create a reasonable risk/reward ratio.
"A man's wealth is not in the coins he carries in his purse; it is the income he buildeth. That is what thou desireth: an income that continueth to come whether thou work or travel."


FOURTH CURE: Guard thy treasures from loss.
Forget about gunning for those astronomical returns promised by market gurus and their "hot tips." And don't bother with those wacky startup businesses you see boxed in the classified ads, either. If you're going to take risks and invest your money, then make sure you have the education to know how to guard and protect your assets. Only you can keep your best interests at the forefront. Your savings control your future; treat them like it.
"The first sound principle of investment is security for thy principal. The penalty of risk is probable loss. Study carefully, before parting with thy treasure, each assurance that it may be safely reclaimed. Be not misled by thine own desires to make wealth rapidly."

FIFTH CURE: Make of thy dwelling a profitable investment.
In most cases, home ownership — even when financing is included — is preferable to renting. At some point, the mortgage payments will end, and ownership will be achieved. There is no ownership for the renter ... ever.
"Thus come many blessings to the man who owneth his own house. And greatly will it reduce his cost of living, making available more of his earnings for pleasures and the gratification of his desires."


SIXTH CURE: Insure a future income.
The future cannot be known, but preparations can be taken to assure a certain level of financial safety. Whether this is done via a strict savings plan, outside insurance, or a combination of both, one must be careful to provide for the wellness of himself and his loved ones in later years. Disability and untimely death have caught and ruined families and their finances since time immemorial.
"No man can afford not to insure a treasure for his old age and the protection of his family, no matter how prosperous his business and investments may be."

SEVENTH CURE: Increase thy ability to earn.
Last among Clason's "cures" is action taken to increase one's earnings. Acquire education, experience, and confidence in yourself, and use these things to improve your income. You might begin a second, part-time job, or simply freelance your abilities in your spare time. Whatever you do, never underestimate the opportunity to turn a favorite hobby or skill (woodworking, photography, home decorating, cooking, etc.) into extra income.
"The more of wisdom we know, the more we may earn. The man who seeks to learn more of his craft shall be richly rewarded. Cultivate thy own powers, study and become wiser, become more skillful, and act as to respect thyself."

Business Card Fiasco

Whenever you meet a subject that you wish to do business with, you want to leave them with something to remember you by. In the beginning, a punch in the eye or humping the subject's leg had proven to be affective for aiding the subject remembering you, but it has been shown to be counter-productive in generating any actual business with that subject. As an alternative, the ancients created what we call today: the business card.

The basic concept of the business card is simple. Take some information about yourself that would aid a person in doing business with you and throw it on a card. Hand said card to subject and wait for them to contact you. Now there is etiquette to giving out business cards, multiple types of paper used, double-sided and a slew of other choices that one must consider when creating / using business cards.

Let me re-create a business card snafu that we just recently encountered. Just like all new business owners, we were excited to get our business cards and begin giving them out. We searched the government incorporation office for Florida and discovered a name that we wanted to use. We ordered the cards first anticipating that it would take the longest to create (since you can file a corporation online in Florida).

We went to Vistaprint and created 500 cards with the name and information required along with a logo that we created from scratch. All this cost us about $50. Shortly thereafter, we decided that the name we chose was limited in nature and we needed to expand the name description to better suit our purposes. Generally, we will doing vending and real estate under this LLC so we didn't want to break them up into separate entities. The initial business name included the vending in it which we didn't think would be very professional looking as we presented the cards to real estate folks.

We still got the cards ordered of course even though they were totally wrong at this point. When we looked at the cards we realized that the design was all wrong. The logo was too big and used up too much space. Because of this, the writing on the cards was too small and difficult to read.

Keeping these lessons in mind we created a new business card implementing our changes. So we returned to Vistaprint and created a 1,000 cards knowing this was going to be the right card for us. This cost us about $65. Well, the lesson here is don't order cards until you get verification that the business name is truly available from the state. We had looked online and saw that our new name had been used in the past, but currently was not in use. We saw that and thought incorrectly; that we could use that name for ourselves. We later discovered that a new law had just passed the summer of 2007 that said you could no longer immediately utilize these previously used names without jumping through some hoops. We guessed that it would take some time to jump through these hoops so we passed on that name and chose one that had never been used.

You guessed it, that meant we had to create another logo and more business cards. This time we waited to get confirmation from the state before we actually ordered the cards. So tack on another $65 for these 1,000 cards for a total cost of $180. In the grand scheme of things this truly is not that much money, but it is a cost that we could have avoided if we went about things differently.

So, just remember to get verification from the state first and create your business cards utilizing the appropriate techniques. Follow this link to 9 business card mistakes: http://www.businessknowhow.com/marketing/business-card.htm and good luck.

Business Entity

Hope for the best but plan for the worst is a motto that has been handed down form generation to generation. This applies to all aspects of one's life and in today's litigious society rings true more than ever. As one goes into any business venture unfortunately one of the main questions is, "Where is my liability and how can I protect myself in case I get sued". Hand and hand with this question is, "What business entity gives me the largest tax break as I report my income". Unfortunately the answer to these questions are often and different since no one business entity provides the best of both worlds. If this was the case, only one entity would exist and all of the others would go extinct like the dodo.

My intent is not to give a lecture on the various types of business entities and what their pluses and minuses are. That is indeed a subject that one needs to obtain a base of knowledge about, but that would be a several page report giving only bullet points on these issues. If you want to learn further about these issues I suggest reading Asset Protection 101 from the Trump University. Don't worry the book is not written by Donald Trump it simply uses his name as an attention grabber so you take notice of the book. The book delves into several topics involving some tax and law suit protection issues. The book is as titled "101" meaning these are but the basic information about asset protection, but believe me the complex stuff is probably way above the layman's head. That's why lawyers and CPA's go to school for many years to grasp the intricacies of the topics.

I will basically say this when it comes to picking a business entity. Never ever do a sole proprietorship. It has no liability protection meaning creditors and lawyers can easily gain access to your own personal assets and it offers no tax benefits. S corporations offer some good benefits and appear to work out well if you are going to have actual paid employees. Since it is a corporation though it does have all of the requirements of filing income statements once a year. I chose a Limited Liability Company (LLC). This gives you the asset protection that is needed, but it is a pass through tax entity which means you simply take your income from that business and add it to your own individual taxes. You still have to register the company once a year, but that is simply paying the state registration fee and giving them the basic demographics of the business (name / address / registered agent). One word of caution about setting up a LLC with a single member. LLC's are a state created entity and are not controlled by the federal government. Since LLC's are relatively new, the Fed still recognizes any that are controlled by a single person as a sole proprietorship. While initially this may not be a big deal, the author of Asset Protection 101 did mention this could create a loop hole the creditors and lawyers can exploit to show your LLC is in fact a sole proprietorship.

Regardless of which entity you choose (remember never choose a sole proprietorship) you have to ensure that you establish the business accordingly so that creditors and lawyers cannot pierce the corporate veil. This simply means that they can show that your business is simply a hollow shell that you use as a front to conduct business in your own interest.

One of the ways they do this is by showing a co-mingling of funds. This means that you have to open a separate banking account for the business and document why and how you distribute funds to yourself from this account. I chose to open a small business checking account with Wachovia Bank. This account is free which is good feature and has several benefits. See the list below which I have copied from their website.

Benefits of Business Checking
No monthly maintenance fee with minimum or average balance requirement
Up to 150 no-charge transactions per month, including checks paid, deposits, deposited items and ACH debits and credits
No charge for up to $5,000 in cash deposits per month
Free Wachovia Business Online, including Online BillPay, Online Statements, and Balance Alerts
Free Bad Check Recovery
Free Visa Business Check Card with Wachovia Possibilities RewardsSM
All Business Check Card transactions are free with no monthly limit
Check Safekeeping Statement or Check Image Statement at no charge
Unlimited use of Wachovia ATMs
Overdraft protection available
Funds in Business Checking are combined with other accounts of the same entity and insured by the FDIC up to $100,000

The one possible draw back for this account is the $5,000 maximum monthly deposit allowance. I'll see if that is an issue and look at other possibilities accordingly. I am also opening a business savings account with ING Direct. They offer one of the best APY in the business (currently 3.4%) and I have been very pleased with the personal accounts that I already have with them.

With these accounts in place and my LLC certificate in hand I am looking forward to starting my business venture with a solid foundation of asset protection.