The Richest Man in Babylon

The Richest Man in Babylon

I wish I had read this book sooner. I found it very useful, despite its unusual, parable-like, story style. The stories teach the reader how to achieve financial success. Even though the setting is ancient times, the advice conveyed is very practical and applies today as well.

When we think about “financial success,” we often think of immediate and big gains: stocks that multiple overnight, big payday, bonus, etc. The reality is quite different: financial success comes to those that work hard and smart, plan for it, and then take patient and steady approach.

The book, which was written in the 1920s by an American author, shares stories that are mostly about a wise man Arkad and how he achieved financial wellness.

Arkad’s main rules are simple:

·         Save 10% of your income

·         Spend less than you earn, after you put away that 10%

·         Once you have a nice amount of money saved up, don’t keep it idle but instead make it work for you. i.e., invest it somewhere so it earns money.

·         Invest it wisely, don’t invest in the areas you don’t understand without an expert guiding your way. Make sure you can get the principal back safely.

·         own the place you live in, i.e., don’t pay rent

·         insure your life, your earnings where applicable

·         increase your capacity to earn by acquiring skills and knowledge.

Now you could argue with some of the points here, but the principles in general are very sound. Save part your income, don’t spend lavishly, then start investing and get back principal AND interest, while keeping insurance around and all the time seeking for ways to improve your ability to earn. Can’t go wrong with that.

Some of the other things that caught my eye were around how you go about saving money. When you start to save, don’t go crazy and frugal to the max, just make sure you start with 10% savings, and that’s a good enough start.

However do analyze your spending and see if there are expenses there that can be cut (but again, within reason). Sometimes we forget subscriptions/services that we keep, and perhaps those can be avoided.

And one of my favorite: “Opportunity is a haughty goddess who wastes no time with those who are unprepared.” When the opportunity comes, those that take it benefit, and to take it you have to be ready — you just never know when it will come.

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