book summary: the richest man in babylon by george s. clason (part 5)
Things to Keep in Mind While Lending Money
Here are some rules on how to lend money to others:
- If you wish to help out a friend, you must do so in a way that won’t bring their burdens upon you. And so, never lend your money to someone who cannot repay it to you.
- Each time you lend, take a token, i.e. some sort of collateral. In case the borrower does not pay you back, you can sell the collateral and regain your principal.
- The safest loans are those where the collateral’s value is more than the loaned amount. This is referred to as overcollateralization in today’s world.
- An individual with a regular source of income is considered a good candidate for giving a loan.
- It’s best to not lend to people who neither have property nor a reliable income source unless a credible third party provides a guarantee that the loan will be repaid.
- We must never lend money to people who get easily carried away by emotions and make poor choices in their financial life.
- In essence, it’s always wise to practice this age-old adage when it comes to lending money: Better a little caution than a great regret.
Always Have Adequate Protection
Financial peace and security play a key role throughout our lives.
We never truly know when we might find ourselves under attack – whether it be losing our job or having some emergency medical bills. Therefore, it’s wise to prepare ourselves in advance and build solid financial walls around us.
We cannot afford to be without adequate protection.
Like the walls of Babylon, financial instruments such as insurance, savings accounts, and several dependable investments act as impregnable walls in our lives, because they protect us 24/7/365 against the unexpected tragedies that might occur.