The Richest man in Babylon - George Samuel Clason

The Richest Man in Babylon is a 1926 book by George S. Clason that dispenses financial advice through a collection of parables set 4,000 years ago in ancient Babylon. The book remains in print almost a century after the parables were originally published, and is regarded as a classic of personal financial advice. This was my 67th of 2021.

The parables are told by a fictional Babylonian character called Arkad, a poor scribe who became the "richest man in Babylon". Included in Arkad's advice are: The "Seven Cures" (or how to generate money and wealth), 

The First Cure: Start thy purse to fattening.

Arkad advises on saving 10% of your annual income to start building up your wealth (or purse): "For every ten coins thou placest within thy purse take out for use but nine. Thy purse will start to fatten at once and its increasing weight will feel good in thy hand and bring satisfaction to thy soul".

The Second Cure: Control thy expenditures.

Arkad advises against luxury expenditures that ultimately become confused as necessities: "The gold we may retain from our earnings is but the start", and, "What each of us calls our 'necessary expenses' will always grow to equal our incomes unless we protest to the contrary", and, "Confuse not the necessary expenses with thy desires".

The Third Cure: Make thy gold multiply.

Arkad advises to invest and to compound the investment return from these savings: "The earnings it will make shall build our fortunes ... Learn to make your treasure work for you. Make it your slave. Make its children and its children's children work for you".

The Fourth Cure: Guard thy treasures from loss.

Arkad advises against taking a risk of loss and investing get-rich-quick schemes: "Is it wise to be intrigued by larger earnings when thy principal may be lost? I say not. The penalty of risk is probable loss. Study carefully, before parting with thy treasure, each assurance that it may be safely reclaimed. Be not misled by thine own romantic desires to make wealth rapidly".

The Fifth Cure: Make of thy dwelling a profitable investment.

Arkad advises buying versus renting your principal residence, and to use your residence to establish a business: "I recommend that every man own the roof that sheltereth him and his", and, "Nor is it beyond the ability of any well-intentioned man to own his home".

The Sixth Cure: Ensure a future income.

Arkad advises on having a pension and future retirement income: "Therefore do I say that it behooves a man to make preparations for a suitable income in the days to come, when he is no longer young, and to make preparations for his family should he be no longer with them to comfort and support them".

The Seventh Cure: Increase thy ability to earn.

Arkad advises to keep developing your own skills to increase your investing wisdom and also to increase your earnings power: "The more of wisdom we know, the more we may earn", and, "That man who seeks to learn more of his craft shall be richly rewarded".

and the "Five Laws of Gold" (or how to protect and invest wealth, covered below). 

A core part of Arkad's advice is around "paying yourself first", "living within your means", "investing in what you know", the importance of "long-term saving", and "home ownership". Some themes can overlap (e.g. The First Cure is similar to the First Law of Gold).

1) Pay yourself first (Save): I found the road to wealth, when I decided that a part of the wealth I earn was mine to keep, and so will you .

Pay yourself - saving 1/10 of what they earn

Start thy purse to fattening. 

2) Men of action are favoured by the goddess of luck. They come up with all kind of excuses for why they  are not in the same position as rich and affluent?

They have talent, they met the right people at the right time or they were born into it. Well this might be the case, for some but not for all. All have been taking action. A procrastinator and doer, both have same opportunity. But only few try out opportunities. The doers try it out. So the chances of them succeeding is high. Because it has to go with action,.

Work attracts friends who admire your industriousness. Work attracts money and opportunity. “Hard work is the best friend I've ever had.”

3) Wealth is not a matter of income. Take care of expenses. Some earn much more than the others, some have much more people to support than the others. But all purses are equally lean. Unusual truth about men is their income is equal to expenses. We feel I-E=S, but it should be I-I/10=E. We should not spend more than 7/10th of our earnings. When we spend, we become slaves, to whom the money goes. 

4) Act when the time is right. Great opportunities are rare, and not to be missed out. For it, cut out the expenditure. 

5) Power of passive income . Put your hard earned money to work. Let your money work for you. It is a modern day slavery. It will help your money grow exponentially. 

6) Make thy gold multiply: invest wisely. Build for yourself a mountain of gold first, then you can enjoy as many banquets as you wish without worry. Don’t spend your money as soon as you earn it.

The 5 Laws of Gold:

• Gold comes easily and in increasing quantity to the person who saves at least 1/10th of their earnings. (First cure)
• Gold labors diligently and multiplies for the person who finds it profitable employment. (Third cure)
• Gold clings to the protection of the person who invests their gold with wise people. (Fourth cure)
• Gold slips away from the person who invests gold into purposes through which they are not familiar.
• Gold flees the person who tries to force it into impossible earnings.

4) Guard thy treasures from loss: avoid investments that sound too good to be true. Take advice from experts. “It costs nothing to ask wise advice from a good friend.”; but don't take any advice from people who are not actually aware. Do not take advice on finance from a brick layer. Go to people who are experts in a particular subject if you want expert advice. It’s too easy for amateurs to give out advice.

5) Make of thy dwelling a profitable investment: own your home. Do not put your money in investments which do not pay a dividend, but also do not invest in risky places that seem too good to be true.

6) Ensure a future income: protect yourself with life insurance. 

7) Improve thy ability to earn: strive to become wiser and more knowledgeable.

8) No man respects himself if he does not repay his debts.

The soul of a free man looks at the world as a series of problems to be solved. Meanwhile, the soul of a slave whines, “What can I do?”

“Where the determination is, a way can be found.”

If you are in debt, live on 70% of what you make. Save 10% for yourself. Use the remaining 20% to repay your debts.

Stick with the plan. Money accrues surprisingly quickly and debts are gone fast with discipline and consistency.

9) Enjoy life while you are here. Do not overstrain to save. 

10) Lending : If you desire to help you friend do not do so in a way that brings their burdens onto you. There are many ways to help people. You don’t have to choose the ways that restrict your time, money, energy, or ability to care for yourself.

The final chapters of the 1926 book cover individual parables:

• The Gold Lender of Babylon. Better a little caution than a great regret.
• The Walls of Babylon. We cannot afford to be without adequate protection.
• The Camel Trader of Babylon. Where the determination is, a way can be found.

There is then an unusual section where a contemporary archeologist reveals five clay Babylonian tablets (numbered I to V), whose inscriptions provide short parables and how it helped him to get rid of his debt, written by Dabasir. Summary of the above chapters. He is determined to follow an exact plan that would lead him out of debt into means and self-respect. It included three purposes which are his hope and desire:

Table 1:

1. To provide for future prosperity: Keep asided 1/10th of all earning
2. Support and cloth wife: Use 7/10th of all earnings for expenses

Table 2:

    3.    Pay off debt out of the earning : Use 2/10th of all earnings to pay off debt

Table 3:

Have a plan and schedule to pay off the debt.

Table 4:

Pay off the debt, and win the confidence of creditors, following Table 1 and Table 2

Table 5:

Become independent without debt, and gradually rich.

The final chapter in the 1926 book is on The Luckiest Man in Babylon - for whom work was the greatest pleasure.