The richest man in Babylon is a classic amongst books on finance. The book gives your advice on finance through tales and parables set in ancient Babylon similar to Aesop’s fables. The book shows that the techniques to become wealthy apply at all times which means they are learnable and not based on luck and circumstance. Here is a summary of them.
One of the tales is about Arkad the richest man in Babylon who is requested to teach a class by the king to anyone that is willing on wealth. The class is divided over seven days.
Seven Cures for a Lean Purse
1. Start thy purse to fattening
What this means is grow the amount of money you have through saving. The book says save at least one-tenth of your earnings.
2. Control thy expenditures
Avoid those frivolous things you don’t need. We all could save here and there to make sure we save at least ten percent of our earnings and there is no real excuse to why we shouldn’t.
3. Make thy gold multiply
Once you’ve built up some savings invest that money into things that will make more money for you. Make your money work for you don’t let it just sit in the bank or in your house. If you invest in investments with good yields you could see it double within a decade.
4. Guard thy treasure from loss
It’s human nature to want things quickly but get rich schemes seldom work. We must guard our money from tempting high yield investments that sound too good to be true. Money is made over time so be patient otherwise you will have to start all over again. Don’t invest in people that are not well versed in the area that you’re investing for example in the book Arkad tells of a story where he gave his money to a bricklayer to purchase rare jewels but it turned out to be glass.
5. Make thy dwelling a profitable investment
Own your own home. You can use the equity you get here to invest in businesses or other investments whereas if you’re renting that money goes straight to your landlord and you won’t get anything from it in the future.
6. Insure a future income
We all know that at some point we will not have the same amount of energy as today to put into working and why would you want to be working at such an old age. So it is inevitable that one day you will have to or want to retire. However people don’t plan for this assuming it is so far away. Invest for retirement and be able to give to your family on your passing.
7. Increase thy ability to earn
Work hard, look for opportunities and educate yourself. These are all things that are in your control so make sure you tip the balance in your favour by working on these areas.
Another story was a five point philosophy handed down the generations by Arkad the richest man in Babylon.
The Five Laws of Gold
1. Gold cometh gladly and in increasing quantity 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.
Again to be rich you must save and at a minimum of 10 percent. You’ll be surprised how many people do not do this and then have no way of having their money work for them.
2. Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.
Investing your money will lead to that money making more money and again. Another fundamental rule to becoming rich.
3. Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.
Invest your money under the advice of people that know the field and not those that have no knowledge of the area.
4. 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 who are skilled in its keep.
This is very simple if you don’t understand what you’re investing in. It is likely you will lose money. Stick to what you know or consult experts in the area.
5. 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.
Two red flags when investing. Schemes with absurdly good returns because then why isn’t everyone doing it and schemes which you are pressured to invest in. If it was such a good investment there would no need for that. Do serious research from a variety of sources before investing your hard earned cash.
Other lessons from the book
A Part Of All You Earn Is Yours To Keep.
People think that all they earn is for them right? This isn’t true what is yours is what you save and the rest goes on expenses. Make sure you pay yourself before anyone else and save at a minimum 10 percent of your earnings.
Two-tenths or 20% goes towards paying off any debt.
Debt and high interest payments are the main way people become poor. If you can’t afford that flashy car, TV or watch you can’t afford it. Don’t trap yourself into buying those things because you’ll delay your journey to wealth by months or years because you can’t invest that money. Focus on building assets until you can afford those items. If you are in debt clear it as soon as possible. A minimum 20 percent of your income is a good rule to stick by.
Men Of Action Are Favoured By The Goddess Of Good Luck.
Ever heard the saying fortune favours the brave. People that succeed are the ones that take action. Start investing and start learning about money through experience and fortune will favour you also.
We Cannot Afford To Be Without Adequate protection.
We must prepare for the worst case scenarios which means to have a safety net when it comes to our finance. This is why retirement savings and insurance policies to protect against the worst disasters are key to being comfortable.
Where The Determination Is, The Way Can Be Found.
The road to managing your finances can be a difficult one. If you keep at it like all things in life you will get better at it and you will learn what the right investments for you are.
I really loved the Richest Man in Babylon. The way it was written through ancient stories and the fundamental knowledge you get from it. Many modern day finance books are based on the lessons given in this book and I have no doubt if everyone followed them they would be a lot more well off.