Richest Man in Babylon By George S Clason, Still Applies Today!
Richest Man in Babylon is a collection of short stories and parables written by George S. Clason, in 1926. I chose to read and analyze this book for a couple of reasons. The skill and narrative of the author are very apparent in this book as well. I also really liked how the message still applies today, and can be understood by anyone. The book outlines the path to financial responsibility and freedom through these tales. This classic book on personal finance takes readers through ancient Babylon and the journey of the common man. Arkad, the protagonist, teaches his friends and followers how become wealthy over time by following some simple rules:
Pay yourself first.
It is impossible to accumulate any wealth if you do not put any money away to save. Arkad suggests that you should pay yourself 10% of whatever money you make, and put it away. If you can afford to “pay yourself” more, then do so. After you pay yourself, you can then pay those who you owe. Since you already have less than what you started with, you are then forced to use the remaining money wisely.
Live below your means.
By controlling our expenses, we can live below our means. Once you have paid yourself your 10%, you can use the remainder for what you need. You don’t have to spend all of your money just because you saved the 10%, too. Remember, as you become accustomed to spending less than your income, don’t allow an increase in your money to ruin that. If you make more money, you don’t have to spend more.
Make your money work for you.
Once you have created an emergency fund that can allow you to survive for a few months, consider investing. By allowing your money to accrue interest over time without you even touching it, you make money in your sleep. There are plenty of options for investing as well. You could invest in stocks, real estate, or even a business. Today, you can make an e-commerce store for next to nothing, and make massive amounts of money. The income you make from this “side hustle” can compound and be used for other investments over time.
Get insurance to protect your wealth.
You have spent long hours and put a lot of focus into growing your wealth. Do not let an accident or something like an economic downturn ruin all of your hard work. Getting insurance allows you to have a safety net for your assets and have them replaced if something unfortunate does happen. You also protect your family and loved ones by having insurance. If something were to happen, the money from the claim could benefit them if you were unable to be there.
Make your home a profitable investment.
These days, many people rent apartments. This book is suggesting that it is better to buy your home and pay it off. By doing this, you have control of your asset and don’t have to pay someone else to live there. You also have the option of renting out rooms, or the house to make money. If you are renting, be sure to live in an apartment that you can afford the rent. This is all part of living below your means.
Ensure your future income by having a retirement plan.
You cannot physically work forever, and why would you want to? After the years and years of hard work and saving up, you deserve to relax. One way to make sure you are financially stable enough to retire and enjoy your life, is by having a retirement plan. Be sure to start early: as money compounds, it grows faster and faster, making time your friend.
Invest in yourself through education.
You are your most important resource and asset. Make sure you invest time into learning as much as you can about things that interest you. Learn a new skill or hobby that can make you money, or you simply enjoy. Often times, people make their money from things they simply enjoy, rather than something they do not enjoy but solely have a proficiency in. Also, your body and health is just as important as your mental health and growth. Eat properly and learn about your diet and body. You cannot spend the money you saved up your whole life, if you aren’t alive to do so.
Know where you are now and where you want to be in the future.
Keep track of your assets and wealth. By keeping a careful eye on your financial situation, you can plan for the future and your goals. If you want to have a certain house or car, it is crucial to recognize where you are right now financially. Every journey starts with a single step, so know where you want to put your foot. By knowing where you are, you can make a plan and track how you can get to your other goals. Once you have your income working by itself for you, achieving your financial goals will be much easier.