If you Google any list of the top rates books in personal development; George S. Clason's, The Richest Man in Babylon will feature in it nine out of ten. It's a book that gives financial advice through a collection of parables set in ancient Babylon. Through their experiences in business and managing household finance, the characters in the parables learn simple lessons in financial wisdom.
The three most powerful points I took from the book were;
Save at least 10 percent of everything you earn and do not confuse your necessary expenses with your desires.
Work hard to improve your skills and ensure a future income because wealth is the result of a reliable income stream.
You cannot arrive at the fullest measure of success until you crush the spirit of procrastination within you.
The Richest Man in Babylon.
Bansir and Kobbi meet with Arkad, asking him why fate has favoured him so much that Arkad has grown rich while they remain poor, even though they've worked harder than Arkad has. Arkad replies that he was once a hard-working scribe who made a deal with a very rich man, Algamish, for the secret to wealth in return for a much-needed copy of a law immediately scribed into the clay. The rich man agreed and the next day when Arkad delivered the carving, the rich man delivered in return the secret of wealth.
"I found the road to wealth," he said, "When I decided that only a part of all I earned was mine to keep. And so will you." Arkad then relates that he asked the same question that is undoubtedly on Bansir and Kobbi's minds, "Isn't all that I make mine to keep?" Algamish then said no, that a man had to pay for his clothes, for his food, etc., but that if he regularly saved at least a tenth of his income (and as much more as he could afford to save) and put that money to work earning interest, he would become wealthy.
A part of all you earn is yours to keep.
Arkad relates that he did as advised, saving a tenth of his income for a year, then investing that money with a brick-maker who went on a journey to buy jewels to trade. He related this to Algamish, who castrates Arkad for this foolishness. "Every fool must learn," he said, "But why trust the knowledge of a brick-maker about jewels? Would you go to the bread-maker to inquire about the stars?" Algamish then said, "He who takes advice about his savings from one who is inexperienced in such matters, will pay with his savings for proving the falsity of their opinions."
Arkad then saved his money for another year, and he invested it with Agger the shield maker who used it to buy materials; every fourth month Agger paid Arkad rent for the use of these funds. Arkad spent these dividends on fine clothing and regularly scheduled feasts. Algamish comments that Arkad is "eating the children of his savings" by not investing them. Arkad adjusts his behaviour and when he finally meets with Algamesh two years later, Algamish is so pleased with how Arkad has taken his lessons to heart, he hires Arkad as a manager of his estate. By continuing to save and invest wisely, Arkad relates that he became the wealthy man that he is now.
Seven Cures for a lean purse.
Sargon of Akkad; the King of Babylon, is told by his Royal Chancellor that the kingdom is poor. There are not enough jobs for everyone, people don't have enough money to buy what they want to buy, and farmers can't make enough selling their produce to continue farming. All of the gold has found its way into the possession of a few very rich men of Babylon.
The King asks why so few men would be able to acquire all of the gold and the Chancellor says because they know how to, that one may not condemn a man for succeeding because he knows how, neither may one with justice take away from a man what he has fairly earned, to give to men of less ability. But why, the King demands to know, should not all the people learn how to accumulate gold and therefore become themselves rich and prosperous?
After further consultation with the Chancellor, the King summons Arkad to teach people how to become wealthy. Arkad then delivers a series of lectures to a class of one hundred men, teaching them the seven cures for a lean purse.
1) Start thy purse to fattening - Arkad instructs the men to begin by continuing to work hard at their current occupations, but for every ten coins placed in their purse to take out for use but nine. Their purses will start to fatten at once and their increasing weight will feel good in their hands and bring satisfaction to their souls. "Deride not what I say because of its simplicity," Arkad says, "Truth is always simple."
2) Control thy expenditures - "How," some of the men ask, "Can a man keep one-tenth of all he earns in his purse when all the coins he earns are not enough for his necessary expenditures?" "How many of you have lean purses," Arkad asks. All of the men say that they have lean purses, that they have no money. "Yet," Arkad responds, "Thou do not all earn the same. Some earn much more than others.
Some have much larger families to support. Yet, all purses are equally lean. Now I will tell them an unusual truth about men and the sons of men. It is this: That what each of us calls our necessary expenses' will always grow to equal our incomes unless we protest to the contrary. Arkad tells the men not to confuse necessary expenses with their desires, that all men are burdened with more desires than they can gratify. "Budget thy expenses that thou mayest have coins to pay for thy necessities, to pay for thy enjoyments and to gratify thy worthwhile desires without spending more than nine-tenths of thy earnings."
3) Make thy gold multiply - This simply explained that, once you've started saving at least one-tenth of what you earn, you must put that money to work earning interest. "Put each coin to labouring that it may reproduce its kind even as the flocks of the field and help bring to the income, a stream of wealth that shall flow constantly into thy purse."
4) Guard thy treasures against loss - "Everyone is tempted," Arkad relates, "By opportunities whereby it would seem that a man could make large sums by investing his money in most plausible projects. Often friends and relatives are eagerly entering such investment and urge him to follow." The first sound principle of investment is security—what is a person who wants a loan from you offering as collateral?
Arkad relates again his decision to invest his money with a brick-maker who was going to buy jewels to trade. Some Phoenicians took advantage of the brick-maker's naivety concerning jewels and sold him bits of coloured glass. "Guard thy treasure against loss by investing only where thy principal is safe, where it may be reclaimed if desirable, and where thou will not fail to collect a fair rental. Consult with wise men. Secure the advice of those experienced in the profitable handling of gold. Let their wisdom protect thy treasure from unsafe investments."
5) Make of thy dwelling a profitable investment - If you pay rent to a landlord all your life, at the end of your life you'll have nothing to show for it. If you can instead pay a mortgage on a house, at the end of your life you'll have a house to show for it. "Own thy own home." This is very important for those that aim high in reality.
6) Ensure a future income - Arkad instructs the class to prepare for retirement and to buy insurance so that their family will be provided for if they die. "No man can afford not to insure a treasure for his old age and the protection of his family, no matter how prosperous his business and his investments may be." Arkad then foretells the future creation of life insurance companies. "Provide in advance for the needs of thy growing age and the protection of thy family."
7) Increase thy ability to earn - A man must set concrete goals and work to achieve them. These goals should not only be to advance in one's career or one's position, but also to become wiser and more knowledgeable. Further, if a man respects himself, he must do the following:
Pay his debts promptly and not stay in debt.
Take care of his family.
Make a will
Have compassion upon those who are injured and smitten by misfortune and aid them within reasonable limits; do deeds of thoughtfulness to those dear to him.
"Cultivate thy own powers, to study and become wiser, to become more skillful, to so act as to respect thyself. Thereby shalt thou acquire confidence in thyself to achieve thy carefully considered desires."
Meet the Goddess of Luck.
This section begins with a Babylonian proverb about luck. "If a man is lucky, there is no foretelling the possible extent of his good fortune. Pitch him into the Euphrates and like as not he will swim out with a pearl in his hand." Arkad chats with another group of men and tells them that the Goddess of Good Luck smiles upon those who work hard, save their money, and invest well.
She doesn't really patronise professional gamblers, who always seem to end up poor. A person must not procrastinate but must strike while the opportunity is ripe. "Good luck can be enticed by accepting the opportunity. (Good luck can be earned when one is aware of the opportunity, and prepared for them.) Men of action are favoured by the Goddess of Good Luck."
The Gold Lender of Babylon - The book tells the story of Rodan, a spear-maker, who received fifty pieces of gold from the king as a gift for making such excellent spears. Rodan seeks out Mathon, a money lender, to ask for monetary advice - what he should do with the money. Rodan relates that his sister wishes Rodan to give the gold to her husband, Araman so that Araman might become a merchant.
If you desire to help thy friend, do so in a way that will not bring thy friend's burdens upon thyself - Mathon relates the story of a farmer who could understand what animals could say. One evening as the farmer passed by outside the stable, the farmer's ox complained to the farmer's donkey about how much more work the ox had to do in ploughing the field instead of just carrying the farmer around. The donkey laughed and told the ox to try to claim a sick day. The next morning, when the ox proclaimed that he was sick and couldn't work, the farmer ordered that the donkey is used to plough the field.
At the end of the day, the ox thanked the donkey for giving him a day of rest and the donkey proclaimed that he was "like many another simplehearted one who starts to help a friend and ends up by doing his task for him. Hereafter you draw your own plough, for I did hear the master tell the slave to send for the butcher were you sick again. I wish he would, for you are a lazy fellow." This ended the friendship between the donkey and the ox.
Better a little caution than a great regret - Mathon then asks Rodan whether a loan would be well made if the borrower could not repay. "Must not the lender be wise and judge carefully whether his gold can perform a useful purpose to the borrower and return to him once more, or whether it will be wasted by one unable to use it wisely and leave him without his treasures, and leave the borrower with a debt he cannot repay?" Mathon then relates that there are three classes of borrowers, those who promise more financial security than they borrow and who are thus always safe to lend to, those who borrow based on their capacity to earn and ability to repay the loan and thus are safe to loan to, and those who have neither property nor assured earning capacity, who will likely never pay a loan back.
He pulls out his box of security tokens and relates some short stories including that of a woman who borrowed money to make her son a merchant. Mathon knew that her son was not ready to be entrusted with such money but to suggest otherwise to the woman was to infuriate her. Since she offered jewels as security, Mathon could not refuse her. Mathon shows that one of the tokens of security is a simple knot tied in a piece of rope, given by a person that Mathon has long lent money to, who always promptly pays his loans back, and uses the loans wisely to become richer.
Mathon has had such a good experience with this borrower that Mathon no longer requires the man to give a "real" security to borrow money. Mathon states that he does not discourage borrowing gold, he encourages it, if it is for a wise purpose. Mathon ends by telling Rodan to read what is carved beneath the lid of the token box, which saying applies equally to the borrower and the lender. "Better a little caution than a great regret."
The Walls of Babylon.
The authors go on to tell the story of Old Banzar, a soldier who guarded the gates of the wall of Babylon. For four weeks, battle rages in front of the walls but ultimately the height and breadth of the impenetrable walls repulse the invaders.
We cannot afford to be without adequate protection - The story concludes with the unnamed narrator saying that "The walls of Babylon were an outstanding example of man's need and desire for protection. This desire is inherent in the human race. It is just as strong today as it ever was, but we have developed broader and better plans to accomplish the same purpose. In this day, behind the impregnable walls of insurance, savings accounts and dependable investments, we can guard ourselves against the unexpected tragedies that may enter any door and seat themselves before any fireside."
The Camel Trader of Babylon - A new character named Tarkad is introduced as a man who has had nothing to eat for two days (except for two figs that he stole before being chased away). He encounters Dabasir, a camel trader, a man that Tarkad owes money to. Dabasir invites Tarkad into the eating house where he orders food for himself and water for Tarkad. Dabasir relates that he was once a slave in Syria.
As a young married man, Dabasir had worked for his father, making saddles, but had lived an extravagant lifestyle, beyond his means. Eventually, due to the constant hounding of creditors, his wife left him and he ran away from Babylon, falling in with some caravan robbers. Eventually, he was captured and taken to Damascus, Syria, where he was sold as a slave. At first, Dabasir thought it was all a great adventure until his new master offered Dabasir as a eunuch to his master's wives.
Where the determination is, the way can be found - Luckily for Dabasir, his master's oldest wife said that they had enough eunuchs, but needed a camel tender. When Dabasir later tells the oldest wife that he's not really a slave but a free man, she protests that he cannot call himself a free man when his financial weakness has brought him to such ruin, that he must have the soul of a slave within him.
Dabasir protests and begins to live apart from the other slaves, to demonstrate that he wants to right what he did wrong, that he has the soul of a free man. The oldest wife eventually helps Dabasir to escape back to Babylon, where Dabasir faces his creditors and eventually repays everything he owes for "where the determination is, the way can be found."
The Clay Tablets from Babylon.
The story of Dabasir is continued in more depth, examining how Dabasir was able to repay his creditors. The story is now set as a translation of ancient Babylonian stone tablets as authored by a professor of archaeology, Alfred H. Shrewsbury.
Tablet No I
Dabasir, under the advice of his friend Mathon the money lender, is recording his financial journey back to solvency. He vows to save one-tenth of all he earns, that he will support and clothe his wife (who returned to him when he returned to Babylon) and pay for their house, their food, etc., with seven-tenths of his income, and use the remaining two-tenths of his income to repay his creditors.
Tablet No II
Every month, Dabasir will take the two-tenths that he has saved and split it amongst his creditors. He then gives a list of who he owes money to and how much money he owes them.
Tablet No III
Dabasir acknowledges that he was a fool when he left Babylon the first time and states that he has spoken to his creditors. Some cursed him for his inability to pay immediately, while others begged to be paid first. Dabasir states that he is determined to repay them all and that he will deal impartially with them all.
Tablet No IV
Dabasir relates what has happened in the last three months, that he did indeed save one-tenth of his income for his retirement and to invest and that he saved two-tenths of his income to repay his creditors. He states that he and his wife are happy and that this plan has made an honourable man of an ex-slave.
Tablet No V
Dabasir says that it has now been a further twelve months since he last made a tablet, but that he just finished repaying his creditors and some are impressed enough that they are even willing to lend him money again, should he want it.
What I took from it.
The secret to becoming wealthy does not have to be a complicated algorithm. In fact, it is actually pretty simple and lessons I wished I learned a long time ago. Part of it is about living below your means. Then about saving one-tenth of your income in interested earning assets. You then have nine-tenths to live off with. If you are in debt, you should only live of seven-tenths of your income; one-tenth going towards savings and two tenths towards paying off your debt.
You must also understand that you can earn yourself luck by working hard and seizing opportunities bravely. Never take on debt to buy some luxury item, because once you find yourself in such unnecessary debt, it’s very hard to get out of it. If you desperately want the item in question, but can’t afford it, save up to buy it. Invest part of what you earn – wisely.
Whatever you earn, always ensure you don’t spend all of it on things you want. There is a difference between needing something and wanting something. Don’t trust a novice or an amateur with your hard-earned savings; no matter how attractive an opportunity seems. If the person you are entrusting with your money is inexperienced in the field, chances are they will fail. Therefore you should only invest in people who have proven they know what they are doing
I loved this book. It’s a classic first published in 1926. Almost a century later, its lessons are still simple and effective.