Can a collection of parables set 4,000 years ago in ancient Babylon bring out the wisdom of wealth for today? Come find out!
The Richest Man in Babylon is a 1926 book by George S. Clason that dispenses financial advice through a collection of parables set 4,000 years ago in ancient Babylon. The book remains in print almost a century after the parables were originally published providing testimony to the relevance to this day and age.
Babylon — Richest City in the Old World
Babylon is founded in 1900 BC and is known to be one of the richest early societies with great engineering, agriculture, and trade. Babylon’s lack of resources was filled by its skilled people and remembered in history as the grand city of the middle east. Babylon had its fair share of rich and poor where some of its people own beautiful chariots simply for parades while others break their backs making the chariots for too little pay.
Meet Arkad — The Richest Man in Babylon
The parables are told by a fictional Babylonian character called Arkad. He worked as a scribe(Clerk). His job was to carve records into clay tablets. Arkad was barely making ends meet and he also had a family to support. One day Arkad’s fate turned around when he met Algomish the moneylender, a very rich man. As payment for a tiring job, he asked Algomish to tell him the secrets of becoming rich. That could change his life forever.
Soon enough Algomish became his mentor on money matters. Arkad learned saving, budgeting, and investing with his advice. He learned through failed partnerships and temptations. He once entrusted his savings to a brickmaker who was seeking to buy and sell jewels and was tricked by the Phoenicians with fake gems. Once he wasted the yields of a good investment by giving in to a grand feast and bought expensive things. But, Arkad kept learning until he mastered the laws of wealth.
Algomish became very fond of him. When Algomish reached his old age, his sons did not learn how to earn their own gold, so he partnered with Arkad to manage his wealth. His contribution helped to multiply Algomish’s wealth and when the old man died, Arkad was given a share which led him to become the wealthiest man in Babylon. It was a story of small beginnings and grand endings leaving us with valuable lessons.
1. Pay Yourself First — Save at Least 10%
You may have heard this a million times, probably because it really does kick start the journey to wealth. Algomish said 10% of all you earn is yours to keep. When you receive your monthly salary, you buy your groceries and pay the stores, you buy your clothes and pay the brands. So why should you forget to pay yourself? It is your own money in the first place. So pay yourself first!
To do this you have to start the habit of saving 10% of whatever amount you earn. The logic is pretty basic. If you earn $100, Instead of thinking you got $100 to spend, you save $10 away and limit your spending to $90.
Most people would be able to cut down spending to fit with the new budget if they start appreciating that there is $10 accumulated per month. In 10 months, you would have a single month’s worth of salary saved under your name! In 10 years, you would have a year worth of salary saved!
2. Control Your Spending
You may be thinking how can I save 10% when it’s even hard to live off the 100$ of my earnings? Arkad understood that your day-to-day needs will always equal your income. So you have to control your thoughts and keep in mind that you only have 90% of your earnings to spend. You’ll be surprised to see that you can actually squeeze your needs in that 90%.
This is why it is important to learn how to budget. The true goal of a budget is to help you grow your savings by lessening your expenses. First, make a list of all items that you think you need and how much they cost. Is the total amount lesser than 90% of your earnings? If it’s not, then study your budget again. Surely there are some items that need to be crossed out. If there are none, try looking for cheaper alternatives.
Stick to the commitment! Just don’t spend your 10% savings.
3. Invest Your Savings
Soon enough as you’re saving a tenth of your pay and controlling your expenses. You will notice that your bank account is getting fat. Saving is satisfying, but it earns nothing or next to nothing!
Algomish once told Arkad that every piece of gold you earn is a slave to work for you. Every copper it earns is its child that can also earn for you. If you are to become rich, then what you save must earn, and their children must earn too. Investing is supposed to create a stream of income that could continuously fill your bank account, even when you are sleeping.
There are five laws of gold according to the book.
1. First law — Gold comes to people who always save a tenth of their earnings to secure family’s future
2. Second law — Gold is very eager to work for you when it is invested in the right opportunities
3. Third law — Gold clings to its owner who carefully takes the advice of wise men in handling money
4. Fourth law — Gold slips away from a person who invests in businesses or purposes which he is not familiar with or not even approved by the people who are skilled in investments
5. Fifth law — Gold flies away from a person who trusts investments that promise impossible great earnings or who believes in the advice of schemers. According to the words of Algomish, a small return and a safe one is better than the risk of losing all of it!
4. Build Your Own House
This lesson might be a controversial one! But, hear it out. You have to have your own house once you’re doing well with your investments. It will now be easier to go to banks to apply for a house loan. This is a good means of getting a house early. If you were to count on your savings, then it could take years before you can own a house.
When you own your own house, there will be no rentals — in most parts of the world, that’s saving a big part of the pie. Above all, fulfillment to have your own roof sheltering you is a wise investment, especially if you already have a family or you’re about to have one.
5. Secure Your Family’s Future
When you’re becoming more stable, you have to start planning for the years to come. Old age will come to you, or worse your health may degrade. There will be a time you will no longer be able to work. So, it is important to have enough money which can keep on working for you.
To secure your own and your family’s future, it’s wise to buy houses and lands, because real estate, especially the lands will grow higher in value over time. When the right time comes, these properties can be sold at a greater price. It is also good to use retirement plans and life insurance. You can also start investing in publicly traded stocks. Invest in companies that will keep on growing for the years to come. Note that there’s no better security for your family than passing down to your children the wisdom on wealth and the rules that govern wealth!
Bonus Points:
- If you want to become rich, action and work are your best friends. All these pearls of wisdom passed on remains dead if not put into action.
- Make a few great friends along the way. choose the people who also live by the wisdom of wealth. there will come a time when you will need help and it is wise to accept aid from someone you already trust.
- If you are the one helping a friend help him or her in a way that will not bring a burden to your own self. Always be cautious as honest people get into trouble because of friends.
- If at some point you will have many unpaid debts, do not keep on borrowing to repay your first debts. What you have to do is to keep working and then divide your pay:
- Still pay you first. Save 10%
- Live off on 70%
- Payments to all your creditors 20%
What are your thoughts? Let me know in the comments below! If you enjoyed this article, please share it and follow for more content like this. Thank you for reading! Part of this content is inspired by the works of Book Simplified youtube channel.
Note: Please note that this is not investment advice, the information given above is presented for financial education purposes only.
Written by Lilan Priyashantha