The Richest Man in Babylon is a classic in personal finance literature. Today, I’ll go through some of the highlights from my own (re)reading of it. Still, be sure to check it out for yourself. It’s filled with more simple wisdom and profound truths than this short review can do justice.
The Richest Man in Babylon is an Absolute Classic
I finished reading The Richest Man in Babylon a while back, and I’m excited to finally share my review!
Normally, I would try to write a book review shortly after reading it. But, this book is much more than your typical personal finance book. It is relatively short and very easy to read, but every lesson really makes you think.
I knew if I wanted to give this a fair review, I’d need to let its stories sink in. I’m so glad I did! Not because I think it’s worse than when I first read it, but because it gets better with age. Even if that age is only a few months, you get the idea.
For anyone familiar with personal finance books, you’ve probably heard of or read The Richest Man in Babylon. It’s a classic! It’s difficult to find someone who hasn’t at least heard of it.
The stories found within in its pages were first published in 1926 in a series of informative pamphlets for banks and insurance companies. Since then, they’ve been compiled together to become one of the best-selling personal finance books ever sold.
Because the lessons aren’t secrets, I’ll give some of the conclusions below, but I still urge you to read the entire book. Conclusions are one thing, but the way the author tells the lessons through stories is an experience you need to have for yourself!
Seven Cures for a Lean Purse
The following list come from the parable called Seven Cures for a Lean Purse. In this story, the king of Babylon wants to solve the great wealth inequality plaguing his land. His advisers tell him about a man who is the richest man in Babylon. They ask him to come and teach the teachers of the land how to build wealth, so that they might teach others. He gives them the following rules to live by:
- Start thy purse to fattening (start saving at least 10% of your income)
- control thy expenditures (keep your expenses from getting out of hand)
- Make thy gold multiply (invest your money so that your money can make you more money)
- Guard thy treasures from loss (never risk losing the principal in your investment)
- Make of thy dwelling a profitable investment (purchase a home, but make sure you can afford it with money to spare)
- Insure a future income (create a passive cash flow for your future)
- Increase thy ability to earn (never stop investing in yourself with knowledge and experiences)
The Five Laws of Gold
In another parable, a story is told about the richest man in Babylon’s son. Instead of simply inheriting his father’s wealth, he needed to go out into the world and prove himself capable of managing his own money. He received a small sum of gold and the “five laws of gold”. Ten years later, the son returns to explain his adventures, and how the five laws of gold aided him in his journey. The five laws are as follows:
- 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.
- Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.
- Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.
- 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.
- 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.
A careful reader will observe that the Seven Cures for a Lean Purse and the Five Laws of Gold have some very similar rules. Still, the stories that go behind these rules are brilliantly written. Despite the simplicity of these rules, I feel like I learn something new every time I read the passages.
Save 10% of Everything You Earn, and Invest Wisely
“A part of all you earn is yours to keep. It should be not less than a tenth no matter how little you earn. It can be as much more as you can afford. Pay yourself first.” – The Richest Man in Babylon
One of the parables is actually the title of the book itself, The Richest Man in Babylon. In this story, the protagonist is struggling to become rich, and he seeks out help to learn how to become rich. He learns that he needs to quit giving his money to everyone else and start keeping some for himself.
While a simple philosophy, people today seem to have a lot of trouble with this. Seven out of ten households in America are living paycheck-to-paycheck. They convince themselves they need everything they have, but at the expense of growing wealth. You’ll never have more money if you spend it all when you get it.
But, the author shows, these savings shouldn’t be laid up to rust. Invest the money. That way, the money is put to work, so you don’t have to. The more savings you have, the more money is working for you, and the less you have to work to survive. Then, you can use the money that your money earned to make more money. It’s a wonderful cycle.
The author describes this as your coins laboring and producing children, which can then be put to work as well. The surest way to build wealth is to save, invest those savings, and reinvest the earnings so your savings grows even faster. Why work when your money will work for you?
Just Follow the Rules
Through these parables, the author provides plenty of hints, tips, and rules. In fact, he teaches a lot more than what I briefly mentioned here. And, none of the rules are complex. They are so simple, they’re boring, yet inspiring! This book will show you how to keep your finances simple, while still growing serious wealth for you and your future. Check it out sometime, it will not disappoint!
Have any of you read The Richest Man in Babylon? What’s your favorite parable? Did anything jump out to you after reading it that you’d never considered? Let me know your thoughts in the comments below!
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