The Richest Man in Babylon
The richest man in Babylon is written by George S. Clason. The book tells the story of Bansir and Kobbi who desire to be rich and decide to seek advice from Babylon’s richest man, Arkad. In the book, Arkad explains the seven cures for a lean purse and the five laws of gold.
Table of Contents
The book uses parables set in ancient Babylon to teach readers about money management and wealth building. It emphasizes the importance of living below one’s means, saving a portion of one’s income, and investing in profitable ventures. The book also encourages readers to set financial goals and develop a budget to help them achieve those goals also includes financial advice such as the importance of paying oneself first, the power of compound interest, and the importance of seeking wise counsel before making financial decisions.
Seven Cures for a Lean Purse
First cure: Start thy purse to fattening
Save at least 10% of your earnings for the future
Second cure: “Control thy expenditures”
Live within your means and don’t spend more than you earn.
Third cure: “Make thy gold multiply”
Invest your savings wisely to earn interest or dividends.
Fourth cure: “Guard thy treasures from loss”
Protect your investments by seeking advice from those experienced in handling money.
Fifth cure: “Make of thy dwelling a profitable investment”
Own your own home, but also make it work for you by renting out a portion of it or starting a business from it.
Sixth cure: “Ensure a future income”
Plan for your future by investing in sources of passive income.
Seventh cure: “Increase thy ability to earn”
Improve your skills and abilities so you can increase your income.
The Five Laws of Gold
First law: Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family: Build wealth for yourself and your family by consistently saving and investing a portion of your earnings.
Second law: Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field: Invest your money wisely to earn interest and increase your wealth over time.
Third law: Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling: Seek the advice of experienced and knowledgeable advisors before making investment decisions.
Fourth law: Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep: Only invest in businesses and ventures you understand and have thoroughly researched.
Fifth law: Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment: Be realistic and cautious in your investment decisions, and don’t fall for get-rich-quick schemes.
What theories do I use in my life?
This book gave me insight into how to manage money and build wealth. It is something that I haven’t been taught in school and through my parents. But managing money is an essential part of life that helps you become financially independent. The key takeaway from this book was that you have to pay yourself first.
“It’s not about having lots of money. It’s knowing how to manage it”
A person who cannot manage their money lives their lives depending on their paycheck. I know many people living their lives depending on their paycheck. Those people spend all their money in the same month and wonder how they cannot become rich.
It seems like those people don’t think about the future and how saving money might help you in sticky situations. I used to be one of those people. Spend all my money in the same month and had nothing left in the week before my salary.
It was unsustainable money management and caused me a lot of trouble. So, after reading this book, I tried to follow the rules in the book. I use 5 out of the 7 cures for a lean purse in my life. namely;
- First cure: Start thy purse to fattening
- Second cure: “Control thy expenditures”
- Third cure: “Make thy gold multiply”
- Sixth cure: “Ensure a future income”
- Seventh cure: “Increase thy ability to earn”
I started with the first two cures and to be honest I didn’t expect it to be easy. I used to think that saving around 10 percent would be disastrous because of my monthly expenses. However, I was wrong.
I created a balance sheet to analyze my monthly expenses and saw that many expenses weren’t even important. So, I cut down my monthly expenses and kept it low. For instance, cut down costs on food, clothing, and shoes.
The next thing I did was instead of saving 10%, I decided to only live on 70% of my monthly income and pay 30% to myself in the form of savings and investments. The savings is meant as a backup for emergencies. And the investment is meant to ensure a bright future.
I have been consistently investing in stocks and saving since February 2022 and I started to improve my skills later in the year after reading multiple books. I started with adobe illustrator and now I am focusing on improving my animations, video editing, and storytelling. However, it didn’t always go smoothly. I have broken some rules in the past too.
Laws that I have broken in the past
I started end 2021 with invested in cryptocurrency but I didn’t know anything about cryptocurrency. So, I ask some friends of mine for advice. Apparently one friend of mine told me that Shiba would go skyrocketing. It will go to the moon. So, I took his advice and invested in a meme currency.
There was a moment when Shiba hit his highest point, instead of cashing out, I listened to a friend of mine that convinced me that it would reach a higher point. The next day, shiba hits me hard. I lost 1000 euros because I trusted my friend who didn’t have enough experience in cryptocurrency.
However, I couldn’t blame him because I knew nothing about the currency. I didn’t do any research. So, this was my mistake to invest in something I didn’t know anything about. That was the moment where I knew that I have broken two laws based on this book, namely; law 4 and 5. Despite losing 1000 euro’s, it was a valuable learning experience.
I recommend you to read this book if you want to know more about managing money while listening to an interesting story. The book explains the theories based on stories and experiences from the characters. So, it is very easy to understand.