George S. Clason wrote “The Richest Man in Babylon” in 1926 and the book’s lessons and insights on personal finance remain just as relevant 100 years later, as evidenced by the over two million copies sold and countless appearances on recommended lists. The book provides timeless advice on personal finance and wealth building through the use of parables told through the eyes of a fictional character named Arkad, a humble scribe who used the book’s methods to become the richest man in Babylon.
While I highly recommend reading the whole book, here are the seven key lessons, or as Arkad calls them, the “Seven Cures for a Lean Purse.”
- Start thy purse to fattening. Arkad advises saving at least 10% of your income to continue accumulating wealth. Do this automatically immediately upon receipt of your earnings. This is the “pay yourself first” principle. The earlier you start saving and the more consistent, the better.
- Control thy expenditures. The lesson here is to spend less than you earn, live below your means, and allow yourself to save more for investment. Keep track of your income and necessary expenses, and consider what is truly necessary and what is a luxury expense or a “want.”
- Make thy gold multiply. Invest your savings prudently into income-producing assets. Continue reinvesting that investment income into more income-producing assets, thus compounding your return. The earlier you invest (and continue to reinvest) your savings, the longer it has to compound and the greater the exponential growth.
- Guard thy treasure from loss. While calculated risks are essential for prudent and productive investing, you must carefully assess investments before committing your capital. Avoid investments that promise returns that appear to good to be true. Carefully consider who you trust for financial advice. You should also avoid debt for anything non-essential as debt can ruin your wealth if not used appropriately.
- Make of thy dwelling a profitable investment. Arkad advises that, in the long run, it is generally preferable to own your home rather than rent. This provides a reliable and and long-term profitable asset. If you are able to transform part of your home/land into a business or source of income, even better.
- Ensure a future income. You will not always be able to work, so make preparations for your investments to continue providing a steady stream of income into the future for you and those you support. Your investment income must be able to meet your necessary expenses when you are no longer able to work. Consider life insurance (modern times) to protect your family in case you pass away prematurely.
- Increase thy ability to learn. Arkad emphasizes continuous learning, self-improvement, and adding to your skills. The more we know and the more valuable we are to others, the more ways we can earn. The person dedicated to improving themselves and their craft significantly increases their capability to multiply their earnings.
In addition to the Seven Cures for a Lean Purse, Arkad also imparts lessons he calls “The Five Laws of Gold.” In the interest of brevity, I have not quoted these laws directly from the book, but have summarized them succinctly as they somewhat overlap with the Seven Cures.
- Consistently save at least 10% of your income/earnings to begin and continue the accumulation process.
- If you invest your savings wisely, your savings will grow and compound on its own.
- If entrusting management of your savings to others, invest with experienced people with integrity and a good reputation.
- Invest in things that you know and can understand.
- Avoid “get rich quick” schemes, overly aggressive investments promising outlandish gains, or investing with people looking to take advantage of your inexperience.
Many of these lessons may seem straightforward and obvious, but are you actually and consistently putting them into practice? Building wealth is a relatively simple process, but it does take personal responsibility and discipline. There are countless ways to distract and over-complicate things to our detriment. Stick to the fundamental lessons imparted in this book, and you’ll likely do well.
Pick up your copy of “The Richest Man in Babylon” today. It’s an excellent read for yourself or as a gift to someone you want to see succeed.
Key Quotes from the Richest Man in Babylon
“Every gold piece you save is a slave to work for you. Every copper it earns is its child that also can earn for you. If you would become wealthy, then what you save must earn, and its children must earn, that all may help to give to you the abundance you crave.”
“Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade.”
“Opportunity is a haughty goddess who wastes no time with those who are unprepared.”
“One may not condemn a man for succeeding because he knows how. Neither may one with justice take away from a man what he has fairly earned, to give to men of less ability.”
“What each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary. Confuse not the necessary expenses with thy desires.”
“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.”
“The first sound principle of investment is security for thy. Is it wise to be intrigued by larger earnings when thy principal may be lost? I say not. The penalty of risk is probable 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.”
“Men of Action are favored by the goddess of Good Luck.”
“Better a little caution than a great regret.”
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