7 ways to grow wealth according to the richest man in Babylon
In the book “The richest man in Babylon” by George S Clason, the parables are told by a fictional character called Arkad, a poor scribe who became the “richest man in Babylon”, who provides advice on generating wealth and money. Arkad was famous for his great wealth even though he was considered equal among the rest. He was not born a king, nor was he born into a rich family. It was his wisdom and knowledge of gold that made him the richest man in Babylon. These are the 7 words of wisdom that Arkad has taught his fellow Babylonians to grow wealthy and be rich.
1. “Start thy purse to fattening” — Start to fatten your purse (wallet)
There are many ways men can work to earn money. Each of these ways is a stream of income for them to fatten their purse (wallet). However, before spending all your money, pay yourself first. “For every 10 coins you put into your purse, you can spend 9 coins but leave 1 coin in your purse. The purse will start to fatten at once and its increasing weight will feel good in your hands and bring satisfaction to your soul”.
This is the concept of paying yourself first, that once you receive your income, keep to yourself 10% of your earnings. The remaining amount is for you to pay off your expenses such as any debt or daily necessities. Over time, this becomes a habit and you will accumulate a considerable amount of wealth. The proportion differs depending on how much you earn and you can afford to pay yourself, but 10% should be the minimum.
2. “Control thy expenditures” — Control Your Expenditures
“Confuse not the necessary expensive thy desires” What Arkad is telling us that sometimes, we tend to think that the things we have to buy are what we thought “necessary expenses” but it is actually just our desires, our wants. We tend to have more desires than our earnings, which is why sometimes we spend more than what we have. We should not be confused about what we should spend on, and evaluate if it is really necessary.
To control our expenses, create a budget with 90% of your income. Write down a list of all the things you would like to spend, then select only those that are really necessary and those are possible to spend within the budget. Cross out the remaining and let them be unsatisfied. Let the budget be an assistant to defend your purse so that you can fatten them.
3. “Make thy gold multiply” — Make the gold multiply
Once the purse starts to fatten and you have learned to control your expenses, its time to make your gold work for you. This is the concept of investing. Arkad’s first profitable investment was a loan to a man called Aggar, a shield maker to buy bronze. Once he sold off his shields, he would repay Arkad with interest, and this is how Arkard earns from his gold, instead of keeping the gold idle.
With this, his earnings multiplied and he starts to extend his loans and investments. He makes his gold work for him by building more streams of income. “A man’s wealth is not in the coins he carries in his purse; it is his income he built, the golden stream that continuously flows into his purse and keeps it bulging.”
4. “Guard thy treasures from loss” — Protect your wealth from potential risks
We have to learn to protect our wealth because it is human nature to be tempted by opportunities to make quick gains. Before entering such investments, always study carefully and understand any potential risks. One way to guard your wealth is to consult with wise men. Get advice from those who are experienced in handling the money instead.
Arkad’s first investment was a total failure when he entrusted a brickmaker to buy rare jewels to make a profit. In the end, his treasures were lost because the brickmaker got cheated and was sold cheap broken pieces of glasses. Why do you entrust a brickmaker, who only knows about bricks to buy jewels, instead of a jeweller? The moral of the story is to let the experienced men and their wisdom protect your treasure from any unsafe investments.
5. “Make of thy dwelling a profitable investment” — Make your place of stay a profitable investment
There are many blessings when you own your own house, instead of rent. Own your own home instead of the need to pay rent to your landlord. “No man’s family can fully enjoy life unless they do have a plot of ground wherein children can play in the clean earth and where the wife may raise not only blossoms but good rich herbs to feed her family”
In today’s context, it is increasingly hard to own a home due to risings cost of land, but that shouldn’t be an excuse to put off saving up for your own roof over your head. Owning a home is also a form of security and a valuable form of investment. There is a reason why people are into property investments.
6. “Insure a future income” — Prepare a future income for old age and your children
In the olden days, people do not anticipate and give much thought to their future days. However, Arkad taught them that after understanding the laws of wealth and creating a surplus, it is important to give thought to future days to ensure safety for the future.
There are ways to prepare this plan. Arkad mentioned that buying houses or lands which are permanent in their value is away. Others may choose to loan money and acquire compound interest over time. But a plan to insure against death is important, whereby men pay in a small sum regularly so that when he or she passed away the family members will receive a sum of money. That’s right, this is the concept of insurance, where you have to “provide in advance for the needs of growing age and the protection of your family”.
7. “Increase thy ability to earn” — Increase your ability to earn
Men will never have enough to spend. There will always be a constant desire to spend more and sometimes, saving money is just not enough. What we need is to increase our capacity to earn more money to increase the golden stream flowing into our purse. Firstly, the desire to earn more must be strong. “General desires are but weak longings”.
Next, increase your skills to be rewarded more, rather than requesting a pay raise blindly. The more wisdom and knowledge we know, the more we may earn. We need to progress constantly and not stay still and be comfortable because we will be left behind eventually.
Always aim to improve and better yourself to instill the confidence and respect for yourself. Think of ways that you can earn more, be it learning from someone in your trade who is more skillful than you, or exchanging knowledge and wisdom with others from another trade. As Warren Buffet says, “The best investment is yourself”, so take the time to invest in yourself and reap the rewards in the long run.
These key concepts provide personal financial advice that is still relevant even today. The book is a good read for everyone looking for personal financial habits and wealth accumulation. Although the information is taught through parables, the concepts are easy to understand and applicable to us at any point in our lives. Start practicing these concepts now before it’s too late.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.
