The Richest Man in Babylon
I originally read and posted The Richest Man in Babylon by George S Clason to YouTube on April 5, 2021. Watch it on Rumble or listen to it on PodBean.
Now, if you look up virtually any list of books put out by the richest of the richest as recommended reading, this book is on it. It’s not a long book, 144 pages, and it’s basically just a set of parables, explaining very basic finances through stories set in Babylon.
Incidentally, whenever you see an article online for how to get out of the poor house, the steps recommended are in this book. So, this is some pretty solid advice.
The steps are pretty simple. There’s seven of them.
1. Start thy purse to fattening. 10% of your income should be put into savings immediately. The rule is, pay yourself first. This 10% is just for savings, this is not for spending on anything. But if you make $10, then $1 should go into savings immediately.
2. Control thy expenditures. Once you pay yourself the 10%, control your expenses so you don’t go into debt. Credit debt is AWFUL. Control your expenses so that you are able to pay cash for everything.
3. Make thy gold multiply. Once you have yourself set up to save 10% of your money, turn that money into an investment. Make it so your money is making you money. Today we call this the stock market. But make GOOD investments. Don’t take stock tips from your cousin who heard X was hot. Talk to professionals. Learn a bit about the stocks you’re interested in. Or alternatively, it’s cool to invest in a business. Provided the person knows what they are doing. This, incidentally, is how angel investors make their money. They find a solid business to invest in, then get returns on the money they loaned toward making the business work.
4. Guard thy treasure from loss. Make good investments and don’t take unnecessary risks. Unnecessary risk would be gambling. The house always wins.
5. Make of thy dwelling a profitable investment. Own your own house. The problem with rent is it’s a bill that never goes away. You will be paying rent forever, and prone to market whimsies, as rent can increase. But if you buy your house, this is debt that you pay down with the end game being you have no debt, beyond whatever your property taxes are (don’t get me started on taxes). Then you have even more income to keep in your pocket or set to investing.
6. Insure a future income. That money you invest. Make sure you do not spend all the income. Basically, you should only be spending the interest earned from your investment, leaving the principal untouched.
7. Increase your ability to earn. Good job. You’ve followed steps one through six, now is the time to up your earning ability. Keep the cycle going.
Now, this all seems straightforward. But what do you do if you are starting from the black hole of debt? Step one remains the same. Get that 10% started. Once you get the 10% started, increasing your wealth becomes easier. So, 10% to savings. 70% for living expenses. Rent (or mortgage if you already own your home), food, entertainment, clothing. These should come out of your 70% for living expenses. MAKE A BUDGET. The remaining 20% is for debts. Any money you owe to creditors, friends, or family, should be paid from this 20%. Now, in the stories as told, after making a list of all the money owed and to whom, the storyteller went to each of his creditors and explained his plan to get out of debt by paying each of them equally from the 20%. I think, although I can’t swear to it, that this is how debt consolidation companies manage it. They reach out to all your creditors and say hey, here’s what’s up, we’ll be sending you money on this person’s behalf. I think. NOTE: This is NOT an endorsement for debt consolidation companies. There are other pathways beyond doing a solid 20% of your income equally distributed among your creditors to get out of debt. And it’s entirely possible you could reach an agreement with credit card companies yourself. But this is what was in the book, so this is what I am reporting on.
The final lesson in the book was that hard work makes money. Nothing comes for free. Hard work will see you successful in life. Hard work and diligent attention to your finances will see you quite comfortable in life. And a lot of it starts with this book.
