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Book: The Richest Man in Babylon

Author: George S. Clason

Published: 1926

Reviewer: Jamie Moon, Staff Writer

First published in a series of pamphlets distributed by banks and insurance companies in 1926, The Richest Man in Babylon, contains simple but profound financial advice that remains relevant today.

Part of The Richest Man in Babylon's appeal is Clason's entertaining but informative style. Described as a “book of cures for lean purses,” The Richest Man in Babylon is written in original parables that feature a cast of colorful characters bent on learning and sharing the secrets of wealth. Clason's writing is very approachable and is suitable for a wide variety of ages, (we recommend the book for ages 12+ and it is a great one to give your kids after you have read it) but its lessons are best applied during one's working years.

Central to the book is the story of how Arkad, the richest man in Babylon, came into his wealth and a presentation he gives to members of his community who are bent on seeking wealth. In this presentation, he outlines the “Seven Cures for a Lean Purse:”

One: Start thy purse to fattening—Save at least ten percent of your earnings. This may seem hard at first, but eventually you will learn to live on less and enjoy the security given by your growing savings!

Two: Control thy expenditures—Sometimes it can be hard to separate wants from needs. As Arkad says, “that which each of us calls our 'necessary expenses' will always grow to equal our income unless we protest to the contrary.” This “protesting” that Arkad speaks of is known as budgeting — by setting limits on how much you spend, you will be better able to know where your money is going, live within your means, and save for the future. Remember to budget in that 10 percent to savings mentioned above. Pay yourself first!

Three: Make thy gold multiply—The key to creating passive income, income you don't have to actively work at a job for, is investing. Take the 10 percent you pay your self first every month and invest it. Once you receive a return on your investment, invest both the money you originally invested and any money it has created for you. Eventually, you will have a steady stream of income apart from what you actively earn.

Four: Guard thy treasures from loss—Invest wisely and seek out the advice of others who are competent in their field. If it sounds too good to be true, it probably is. Always try to invest in a way that you preserve the money that you have worked so hard to earn and save.

Five: Make of thy dwelling a profitable investment—Rather than spend years renting and have nothing to show at the end of the day, consider buying your own home. Eventually you will own your home outright and can put the money you would have paid in rent or a mortgage towards other things like “making thy gold multiply!”

Six: Insure a future income—Age and death are two features of life that no one can avoid. Consequently, it is important for everyone to prepare for the inevitable so that they can have both something to live off of in their old age and something to leave behind for their families when they die. Today this is accomplished in primarily two ways: saving and investing for retirement and purchasing adequate life insurance.

Seven: Increase thy ability to earn—Especially in today's economy, it is important to keep your skill sets current and expand your knowledge about your chosen field. Doing so not only makes you an attractive candidate for advancement in your company (and for those of you who are self-employed, it will allow you to better develop your business or craft), it also helps act as job security. By being the best in your field, and constantly striving to become better, you will become more competitive in the job market.

These simple but profound financial principles go a long way toward helping you “fatten your purse” (or savings account/money market fund) in a day and age where we generally pay for our purchases with debit cards and receive our paychecks through direct deposit rather than gold (or paper money and coins as they did in Clason's day). The “Seven Cures for a Lean Purse” and other principles outlined in The Richest Man in Babylon have direct relevance to our lives today. Principles such as saving, budgeting, and investing are timeless. If you are interested in learning more about basic personal finance in a way that is both fun and informative, consider buying The Richest Man in Babylon by George S. Clason—or give it to one of your kids to read.

This in one of Robert Hockett’s favorite books…he routinely gives away 20+ copies per year to clients and friends.