THE RICHEST MAN IN BABYLON
The Richest Man in Babylon is a book from 1926, written by George S. Clason. Showing principles of personal finance and wealth accumulation. Using tales from the ancient city of Babylon he explains each principle nicely. Each principle that is still applicable to our days. When we look at the time-line his book was just prior to the great depression… which makes me wonder how he and those who read it dealt with finance during those times.
- Lucas: “The 7 cures for a lean purse are applicable in today’s world. It is very interesting how this book was written a long time ago and it is still a guide for financial freedom.”
- Victor: “I like how the book is structured, having the 7 cures and 5 laws of gold in the beginning, then hitting us with stories. Which allows us to search for those principles in the stories. The principles are still effective and will always be, it seems to be like a “nature law”.
- Lucas: “The old language is hard to understand. By the end of the book, the author focuses more on histories than on financial concepts (the stories relate to the concepts previously presented though), but they ended up being too long.”
- Victor: “It can be somewhat an annoying read due to the Archaic English, and the need to look up some words. I felt like I was reading out of a clay tablet with candles to illuminate it, except it was my phone and I had no lights on. I am sure there are many other versions with modern language making it easier to read.
Main Points of Book
THE FIRST CURE – “Start thy purse to fattening”
- Save at least 10% of your income.
- The more you accumulate, the more you can take advantage of the time value of money and compound interest.
- “For every ten coins thou placest within thy purse thke out for use but nine.’
THE SECOND CURE –“Control thy expenditures”
- Budgeting. Do not let your casual wishes control you.
- Understanding all of your expenses and knowing where to spend your money efficiently.
- “The purpose of a budget is to help thy purse to fatten. It is to assist thee to have thy necessities and, insofar as attainable, thy other desires. It is to enable thee to realize thy most cherished desires by defending them from thy casual wishes. Like a bright light in a dark cave thy budget shows up the leaks from thy purse and enables thee to stop them and control thy expenditures for definite and gratifying purposes.”
THE THIRD CURE –“Make thy gold multiply”
- Build different sources of income (passive income): stock dividends, bonds
- Investing where there is compounding.
- “I tell you, my students, a man’s wealth is not in the coins he carries in his purse; it is the income he buildeth, the golden stream that continually floweth into his purse and keepeth it always bulging. That is what every man desireth. That is what thou, each one of thee, desireth; an income that continueth to come whether thou work or travel.”
THE FOURTH CURE –“Guard thy treasures from loss”
- Do not invest your money in something you do not have knowledge in.
- Avoid risky investment (penny stock, cryptocurrency…)
- If a person do not need part of their income and is willing to risk it, a riskier investment is valid (my opinion)
- Treasury securities.
- “Every owner of gold is tempted by opportunities whereby it would seem that he could make large sums by its investment in most plausible projects. Often friends and relatives are eagerly entering such investment and urge him to follow”
THE FIFTH CURE –“Make of thy dwelling a profitable investment”
- Make profitable investments
- Avoid living on rental property. Some investments may cost a little more at first but they can generate profit later.
- “All too many of our men of Babylon do raise their families in unseemly quarters. They do pay to exacting landlords liberal rentals for rooms where their wives have not a spot to’ raise the blooms that gladden a woman’s heart and their children have no place to play their games except in the unclean alleys.””
THE SIXTH CURE –“Insure a future income”
- Save for retirement
- Annuities and plans which insure a revenue stream.
- “Provide in advance for the needs of thy growing age and the protection of thy family.”
THE SEVENTH CURE –“Increase thy ability to earn”
- Study, read, research, take courses to increase your knowledge and consequently apply the knowledge and increase your income.
- Invest in your own business.
- “Thus the seventh and last remedy for a lean purse is to cultivate thy own powers, to study and become wiser, to become more skillful, to so act as to respect thyself.”
- “Our acts can be no wiser than our thoughts. Our thinking can be no wiser than our understanding”
Times change but personal finance does not. Principles may be old but never outdated. Yes some terms may change but the essence is the same.