The Richest Man in Babylon – Money Lesson 6 – Tips for Lenders and Borrowers

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Whether you are a lender or a borrower of money, it always is a good practice to be careful on where the money you lend or the money you borrow will be used.  Either way, you will be impacted, that’s why always do your research on any deals or investments you make.

It is noble to help others, specially your relatives and close friends, and this is actually one of the reasons why we want to be financially free, so that anytime we need to help others, we can actually help financially.  But make sure that when you offer to help someone, that the burden of the one you’re helping does not become your burden.  Make it a point to help others stand on their own, to be independent and not always dependent on you.  Also, check what is it that those borrowing money from you will spend the money they borrowed on, always gauge the probability that your money will be returned to you.

Similar to what Rich Dad, Poor Dad author Robert Kiyosaki says, “There is good debt and there is bad debt”.  Good debt is money you loan with the plans of letting the money from the loan work for you.  Letting the money increase and be able to pay the loan with the earnings.

But borrowing money and letting it earn is not enough.  Again, you should know where you’re investing your money, if you were good at technology, shouldn’t you be investing in something related to tech? Or at least do your homework, research about whatever you plan on investing in, ask around, ask people who have invested in the same thing, check if they are successful and how long is the return on investment, so you can estimate when you can pay out your loan.

In investing your money, you may have different objectives:

  1. Capital preservation – you just want to keep your money safely, that all the capital you invested will always be there, it may earn, but you are sure that it will never become less than the original amount you invested, your capital.
  2. Capital appreciation – you want to invest your money, hoping that it will earn more money overtime, but there is a risk that in an unforeseeable event you could lose your capital.

In whatever investment you might want to do, always do the needed research, it is better to be a little cautious than have great regret later on.

 

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