The Richest Man in Babylon, by George S. Clason, is a personal financial classic and a book that I have enjoyed. It was written in 1926 and has a poetic style, telling stories with financial concepts in the form of parables. These stories not only discuss our relationship with money but also a broader life philosophy. It’s concept oriented and meant to stand the test of time without using financial jargon. The book illustrates the purpose and meaning that we can create in our life by using money wisely. We often get caught up in the details of a certain investment or account type but this book takes a step back and addresses fundamental wealth creation principles to live a happier, more prosperous life in the long-hall.
In one of the books, Arkad (the richest man) outlines the “Seven Cures for a Lean Purse” to the citizens of Babylon so that they may also have his financial success. Here are seven “simple truths” that will help you on your journey.Start thy purse to fattening.
Work hard at your current job and only spend 90% of what you earn. Arkad didn’t miss the money he wasn’t spending and felt “satisfaction” with the money he was saving.
Control thy expenditures.
We tend to spend what we make and adjust our lifestyles accordingly, making up new “needs.” It takes mindful action to work against this tendency. In order to save 10% of our income, we must “budget thy expenses that thou mayest have coins to pay for thy necessities, to pay for thy enjoyments and to gratify thy worthwhile desires without spending more than nine-tenths of thy earnings.”
Make thy gold multiply.
Arkad lost money on his first investment but subsequently made money by lending it to a shield maker and reinvested it so that funds continued to compound over time.
Guard thy treasures from loss.
“Study carefully, before parting with thy treasure, each assurance that it may be safely reclaimed. Be not misled by thine own romantic desires to make wealth rapidly.” Additionally, Arkad recommends being protective of your principle and consulting with experts when making investment decisions.
Make of thy dwelling a profitable investment.
This cure is relatively straightforward; “Thus come many blessings to the man who owneth his own house. And greatly will it reduce his cost of living, making available more of his earnings for pleasures and the gratification of his desires. This, then is the fifth cure for a lean purse: Own thy own home.”
Insure a future income.
It is harder to protect against a lean purse as you grow older so take measures now. Life insurance is one of the measures to consider.
Increase thy ability to earn.
Arkad contends that by expanding ones knowledge and wisdom one will gain respect for ones self and will be better able to pay debts on time, provide for family, create a will so that a meaningful legacy is bestowed and have compassion for others less fortunate.
I would highly recommend The Richest Man in Babylon for anyone interested in a big picture approach to personal finance. This book lends great perspective to handling your money and I hope it helps you on your journey!
This post was written by SaveUp’s personal finance contributing writer, Catherine Hawley, CFP®.