Money has changed with time. Now we have paper bills and digital currencies, while the currencies come before in salt, livestock, and even seashells. But although there were changes as time goes by, the concept of money didn’t change with age.
George S. Clason’s 95-year-old book “The Richest Man in Babylon,” published in 1926, was still regarded as one of the best financial books despite millions of newly published books. This book shares short stories of the wealthiest men in Babylon, giving a piece of advice on getting rid of debts, acquiring riches, and investments.
The collection of parables of Clason was based in the beautiful ancient city of Babylon, starting with Arkad. Arkad was from a large family, having no hope of inheritance. Despite being just a son of a humble merchant, Arkad grew to be the wealthiest man in all of Babylon, applying the wisdom he learned from Algamish, a rich money lender.
With the hope to turn Babylon into the wealthiest city in the world, the King of Babylon himself asked Arkad, who had nothing to begin with, to share his “secret to wealth” with the rest of the city. Arkad humbly agreed to the request and taught 100 men the seven secrets in curing a lean purse in a class.
Clason focused on seven rules people must follow in order to acquire wealth. These rules were so simple and relevant as ever— easy to understand and apply. Let’s jump into the remedies for a lean purse and how we can apply them in a modern context.
Pay Yourself First
Everyone has a job that they do to make a living. Perhaps some are working in agriculture, some as teachers, doctors, software developers, etc. And even people who don’t hold a job in the traditional sense probably have a trade or skill that brings income. Regardless of the nature of your work, you do get an income—big or small.
The problem with today’s society is they utilize nearly all of their income paying bills, shopping, and trading, forgetting to pay themselves first.
Paying yourself first means saving even just a fraction of your income constantly, no matter how small. For instance, you have an empty basket, and every time you have ten eggs, you put one on it. Although the basket won’t immediately overflow with eggs, slowly but surely, it will if you continue setting aside one egg without fail.
The same goes for wallets. If you earn $10, you should only use up $9 and save the $1 left. Saving $1 each payday will eventually fatten your wallet.
Arkad’s first remedy to a lean purse is saving up 1/10th of income. However, this may be hard for people who are earning the bare minimum, which is not even enough for their living expenses. This is where the second step to acquire wealth comes in.
Eliminate Expenses
People earn different wages, some earn much more compared to others, and some make small and yet have a large family to support, like Arkad. Yet, all man’s purses are lean equally. This is because a person’s expenses grow equally to their income.
If you can’t set aside even just 1/10th of your income, you have to pay close attention to where your money goes. Are you spending on necessary things? Some people confuse necessary expenses with desires. And most people desire something more than their earnings can gratify.
Try looking at the transactions in your bank account and mark each either “necessary” or “unnecessary.” If you find yourself eating out every week, having a gym membership, and subscriptions Netflix, try cutting down these unnecessary expenses if you can.
By thoughtfully giving attention to your living habits, you will find some expenses to be eliminated or reduced.
Learn to budget necessary expenses, and do not touch that one-tenth that you should be saving. Doing so will fatten your purse and help you take control of your expenditures for future gratifying purposes. Budgeting will allow you to recognize your ultimate desires and life necessities.
Put Your Money to Work
Although some people know how to save and cut down expenses, they do that to buy things they want to. They save to buy a pair of expensive shoes, branded bags, and luxurious cars, which is a money mistake that each person should avoid.
Many people failed to realize that money can work too, and it’s not just something that is only used for their living and to pay for stuff. It will be hard to fatten your purse if you don’t learn to put your money at work.
Rich people see every dollar as something that can work for them to earn. In other words, you can start investing so your money can make more money. Consider how you can put all of your assets to work because it will earn nothing if you just let it sit on your bank account.
You can start a variety of investments, from real estate to stock market, bonds, and even lending. Find an investment that brings reasonable earnings. Remember that a man’s wealth is not in the money he carries inside his purse but the income streams he builds that continually flow in his wallet.
Protect Your Wealth
Arkad also taught his students to protect their money from losses by avoiding the quick riches scheme and other investments with significant downside risks.
As humans with desires to make a good amount of money, we often get tempted by investment opportunities to make lucrative returns. We frequently want to win big. However, putting your principal at high risk is not a good idea. Hence you need security for your principal.
Evaluate every investment opportunity carefully to guarantee that you will be able to get your principal back before finally investing. Never every put your money into an investment you don’t even understand, no matter how good the potential income is.
Start acquainting yourself with the risk and act with due diligence. You can also ask for advice from those who are investing.
Own Your Home
Instead of paying high rents, you should pay for your own house to grow your wealth faster. Having a roof over our heads is necessary, so why pay for rent if you can just use your money to buy your own house?
Your hard work will seem more fulfilling, especially when you know that you’re working for your own home rather than pay rent to other people. Thus, Arkad suggests that everyone should have their own home.
Ensure Future Income
Time doesn’t stop for anyone, and so people get old eventually. That’s why you need to prepare your finances for the years you cannot work any longer. Make sure to save enough money for your retirement, and in order to do this, you need to invest long-term.
The Richest Man in Babylon suggests people buy lands and houses for this purpose. The value of these things increases, and its sale will provide money in the years to come. You could also let your money places, for 20-30 years, where it can earn a great sum of wealth for retirement.
In a nutshell, you need a retirement account, investments, and business to prepare for your future.
Increase Your Ability to Earn
If you’re a tax accountant, invest in learning a new skill that will benefit your client. If you’re a physiotherapist, invest your skills in knowledge of rehabilitation. Whatever your craft is, invest in learning more skills about it to increase productivity and increase other pillars of wealth much faster.
The more knowledge a person holds, the more opportunity they have to earn. In order to get wiser, a person must become a continuous learner. As your learnings and skills grow, you will be more confident to present yourself with people, which would open up more opportunities for you to earn more.
Moreover, you should develop habits wealthy people have.
