The Richest Man in Babylon first appeared on the scene in 1926 as a series of informational pamphlets on basic financial management. By 1927, several of these pamphlets had been compiled into a book and this collection has been in print ever since.
In short, The Richest Man in Babylon is a series of financial parables. These stories are set in ancient Babylon and relate the story of a Babylonian regular guy who used some basic financial sense and built up a great deal of wealth.
What’s so great about that, you ask? The stories are laid out like Aesop’s fables: each story has a concrete point or two that becomes apparent from reading and digesting the message. These points are basic tenets of how to get ahead financially in any time, not just in Babylonian times or in the 1920s.
This book is perfect if you learn by reading the experiences of others. The entire book is told in a story-like format so it often goes down much like reading a collection of short stories. The language is a bit strange, as the author attempts to sound like this is an authentic tale from the ancient days, but the messages are as clear as sunlight.
Seven Cures for a Lean Purse
Since The Richest Man in Babylon is divided up into several short stories of varying degrees of quality, I thought I would review in great detail the one story that I found the most compelling.
The tale “Seven Cures for a Lean Purse” relates a story about Arkad, the titular richest man in Babylon. He is requested by the king to teach a class to anyone who wishes to attend on the methods he used to build his wealth. He divides this class across seven days, with each day focusing on a particular method for saving money. Here are the seven methods.
Start thy purse to fattening Take one-tenth of what you bring in and save it for the future. The book uses a coin analogy: for every nine coins you spend, take one and put it away for yourself. This is very sensible; a goal all of us should have.
Control thy expenditures Don’t buy frivolous things even if you have enough money to pay for them. Instead, make sure that you can continue to save one-tenth of what you bring in. For this reason, I write about frugality on The Simple Dollar.
Make thy gold multiply Once you start to build up some savings, invest that money so that it will make more money for you. Another pretty clear point; if you start saving money, it shouldn’t just sit in a mattress. Even a high-yield savings account is much better than that, and it can double your principal in about fifteen years.
guard thy treasure from loss This one is interesting: you should only invest in things where the principal is safe. In other words, the book seems to discourage stock investing. I found this to be particularly interesting given that it was written in 1927, right in the midst of the first big American stock market boom. Of course, 1929 proved the author right.
Make of thy dwelling a profitable investment One should own their own home rather than renting because then money can be invested in the home or invested in other things rather than handed over to the landlord. Something tells me that this lesson applied better before people were looking at homes that were three or four times their annual income.
Insure a future income In other words, invest for retirement and your family’s well being after your passing. You should be dropping some Hamiltons right into your retirement account if you can possibly afford it.
Increase thy ability to earn Work hard, look for opportunities, and educate yourself. Today, a college education is one of the best investments you can make; I’m not saying that it’s a requirement to be successful, but it opens the door to greater possibilities.