‘The Richest Man in Babylon’ written by George Samuel Clason in 1926, is one of the finest personal finance books one can ever read.
It is full of financial wisdom told in the form of interesting parables set in the ancient city of Babylon 4,000 years ago.
Arkad, the richest man of Babylon city during that time, as Elon Musk for today, shares wisdom as he explains how he became rich.
Financial Lessons from the Richest Man in Babylon
1. Always Pay Yourself First
In the first story, we meet Arkad, the richest man in Babylon, sharing one of his secrets to financial success – PAY YOURSELF FIRST.
It is a recommendation for us to save 10% of our income before using on other expenses.
When saving is being prioritized, we build a strong foundation for wealth and financial security.
2. Control Your Expenditure
In one of the parables, we come across Bansir and Kobbi – who are both struggling to make ends meet despite earning decent income.
The lesson is clear: living within means is essential for financial security and prosperity.
If we live frugally and don’t borrow excessively, we avoid the shackles of debt and achieve greater financial freedom.
3. Make Your Money Multiply
Arkad calls this as your gold working for you. This is investing the money you saved in wisdom#1.
He says that we must let our gold have children, who’ll then also work for us. He meant investment and compound interest.
It is the magic of compound interest. Arkad reveals that when money are wisely invested, they grow exponentially over time.
We’ve learnt the importance of compound interest and re-investing them in the story Grandma and her Goose that lays Golden Eggs.
4. Guard Your Treasures well
“The Richest Man in Babylon” also teaches us how important it is always to be prepared for unexpected events.
No matter how well we plan, life can throw curveballs. So, it encourages building of an emergency fund for challenging times.
Arkad also tells us that there is no shortcut to making money as it takes patience, hard work and knowledge.
When Arkad speaks to Dabasir, we also learn the importance of seeking only wise investment opportunities, not blindly following others without understanding it.
5. Make Your Home Profitable
Arkad tells that everyone must have his own home to reduce the cost of living. It makes so much sense.
How much will be our living expense if we don’t have to pay at least 40% of our income as rent every month?
It is surprising to realize how less money we need to live even in places like Thimphu and Paro if we take out rent.
6. Ensure Future Income
It means we must have a predictable income in the future even if we’re not able to work or some ill luck befalls on us.
The extended modern version of such wisdom can be building multiple income streams.
During economic downturn or financial problems, it’s only the cashflow that shall protect you from becoming a Bongku Tashi.
Therefore, Arkad encourages us to plan for future periodical cashflows and retirement fund.
7. Increase Your Ability to Earn
The best investment is investing in oneself. Arkad refers it investing to increase earning ability, which is the same thing.
One best thing to increase our earning capability is through knowledge and learnings.
Education helps you in making informed decisions, seize opportunities, and navigate economic challenges with confidence.
‘A fool and his money are easily parted’. Keep learning not to part from your money and become a fool.
The Richest Man in Babylon is still a very practical book. It has inspired books the book Rich Dad Poor Dad, and more!
Have you read the richest man in Babylon? Which lesson you love the most?
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