Who would have thought that the most relevant rules of money would be found in a 96-years old book with actionable steps to build your wealth?
The book, The Richest Man In Babylon by George S. Clason in 1926 is undeniably a personal finance classic.
Babylon was the wealthiest city in the world at the time of its height because its people appreciated the value of money.
This is a story of Arkad, with a humble background as the son of a merchant who grew to become the richest man in the ancient city of Babylon by drinking from the wealth of wisdom of a money lender, Algamish.
This is a book that sufficiently deals with practical money management and wealth-building lessons used by Arkad,
In this book are 7 financial lessons Arkad called “seven cures for a lean purse” which he presented to a group of 100 men in a bid to transform Babylon into the wealthiest city in the world.
Here are the nuggets:
Start thy purse to fattening
Interpretation: Save 10% of your income.
“For every ten coins, thou placest within thy purse take out for use but nine. Thy purse will start to fatten at once and its increasing weight will feel good in thy hand and bring satisfaction to their soul”.
You must constantly have an income that keeps your purse full. You will only begin building wealth when you start to realize that a part of all the money you earn is yours to keep. That is, pay yourself first. You always pay others for goods and services. Pay yourself as much as you can. Save money.
You should save at least 1/10th of what you earn or more if you can afford to do so.
Control thy expenditures
Interpretation: Live below your means
“What each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary. Confuse not the necessary expenses with thy desires”.
Do not live beyond your means, it is better to build for yourself a mountain of gold first, then you can enjoy as many banquets as you wish without worry. Don’t spend your money as soon as you earn it.
Your “necessary expenses” will always grow to match your income unless you resist that urge. Do not confuse your necessary expenses with your desires.
Make thy gold multiply
Interpretation: Make your money work for you
“The gold we may retain from our earnings is but the start. The earnings it will make shall build our fortunes. Learn to make your treasure work for you. Make it your slave. Make its children and its children’s children work for you”
Money is plentiful for those who understand the simple laws of making money. It is easier to make money but another ballgame to multiply it.
Do not stop at saving money, take a step further by making that saving work for you. Make it an investment.
Guard thy treasures against loss
Interpretation: Protect your wealth
“The first sound principle of investment is security for thy principal. Is it wise to be intrigued by larger earnings when thy principal may be lost? I say not. The penalty of risk is a probable loss. Study carefully, before parting with thy treasure, each assurance that it may be safely reclaimed. Be not misled by your own romantic desires to make wealth rapidly”.
Do not take advice on finance from a bricklayer. Go to people who are experts in a particular subject if you want expert advice.
Do not put your money in investments that do not pay a dividend, but also do not invest in risky places that seem too good to be true.
The wise lender always has a guarantee of repayment should the investment go poorly.
Above all, you should desire safety for your money. Better a little caution than a great regret.
Protect yourself with insurance. You cannot afford to be unprotected.
Make of thy dwelling a profitable investment
Interpretation: Build or rent a home you can comfortably afford.
“I recommend that every man own the roof that sheltered him and his. Nor is it beyond the ability of any well-intentioned man to own his home. To own his domicile and to have it a place he is proud to care for, putteth confidence in his heart and greater effort behind all his endeavors”
Enjoy life while you are here. Do not overstrain to save
Ensure a future income:
Interpretation: Plan for retirement
“The life of every man proceedeth from his childhood to his old age. Therefore do I say that it behooves a man to make preparations for a suitable income in the days to come, when he is no longer young, and to make preparations for his family should he be no longer with them to comfort and support them.”
It is not early to start saving for that retirement life you dream of.
Increase thy ability to earn
Interpretation: Invest in yourself
“That man who seeks to learn more of his craft shall be richly rewarded. The more wisdom we know, the more we may earn. Cultivate thy powers, to study and become wiser, to become more skillful, to so act as to respect thyself. Thereby shalt thou acquire confidence in thyself to achieve thy carefully considered desires”
The more we know, the more we may earn. The person who seeks to know more about their craft is capable of earning more.
Increase your ability to earn. Improve your skills. As you perfect your craft, your ability to earn more increases.
The wise lender always has a guarantee of repayment should the investment go poorly.
Above all, you should desire safety for your money. Better a little caution than a great regret.
Protect yourself with insurance. You cannot afford to be unprotected.
