The Richest Man in Babylon – book review

It’s never too early to think about finances. And it’s never too late. Often, we don’t do that, but we probably should.

I came across the financial book is quite unique. It’s called “The Richest Man in Babylon” by George S. Clason. It’s one of the first and now classic books about money as we understood it in the 20th century. Though it was written in 1926, I was surprised to learn that all of the book’s advice is still valid today, and it’s pretty much what other books and financial advisors teach nowadays still. Even though life changed dramatically since the book’s publishing time, it’s still applicable today, as it was, as the author argues, in the time of Babylon, 4,000 years ago.

Written as a collection of short stories, tales and dialogues, the book is easy to read. That helps to bring home the financial advice that is still true today – the source of the wealth is not a stroke of luck is but based on knowledge how money work and how to put this knowledge to the daily practice.

Here is a quick summary. (These are not my advice, but the ones taken from the book).

Lesson One – The Part of What You Earn is Yours To Keep.

Nowadays this advice often told as “pay yourself first”. In a simple term – keep to yourself at least 10% of your earnings and pay for other expenses, including your debt, from what’s left. Typically, we tend to do otherwise – pay for expenses and then save what’s left after that. Paying yourself first, as the book suggests, will start you on a pass to accumulate wealth. And, more likely than not, you will be surprised that you have enough left to pay for your expenses from the remaining 90% of your income.

Lesson Two – Control What You Spend.

In modern language, this would be “budget”. The boring concept for many and thus hard to do. The main point here is to know clearly what expenses are necessary and what are discretionary.

Lesson Three – Put Money To Work.

As soon as you start seeing money saved, you start thinking about what to do with them. The magic of money is that they can produce more money. Compound interests come to mind. Whether you are super aggressive or very cautious – there is always a money investment that fit your individual preferences.

Lesson Four – Guard Treasures From Loss.

That goes along with the previous lesson and in modern language means – “invest carefully”. Financial advice abounds and get-rich-quick schemes are as popular nowadays as they were in Babylonian times. But, as saying goes, if something is too good to be true, it probably is. Regardless of your risk tolerance, the preservation of the principal is paramount in any investment.

Lesson Five – Make Your Dwelling a Profitable Investment.

Real estate is a special type of investment – you can use at the same time as it can “work” for you. Typical modern advice is to own your home instead of renting. But it may also mean that you can become a landlord. Not everyone is in the position to own real property, but perhaps, it may be your goal?

Lesson Six – Ensure Future Income.

Translated into modern time this means “prepare for retirement”. However far it may seem at the young age, the time for that will inevitably come, whether you are ready or not. The goal is to ensure that you would still have some income when you no longer can work. Seems boring and unnecessary, but remember “compound interest” that works overtime, maybe that will bring you some joy.

Lesson Seven – Increase Your Ability To Earn.

There is a popular opinion that it takes 10,000 hours to master a certain occupation. That roughly translates into 5 years of full-time employment. Perhaps we are all masters at what we do already, but the goal is not to stop here. Lifetime learning and development is key. I also see a different faucet here – expand your expertise into other areas, increase your potential sources of income. It’s exciting, profitable, and gives you “peace of mind” in times when life gets tough.

The book:

“The Richest Man in Babylon”, by George S. Clason

More about Babylon:

https://en.wikipedia.org/wiki/Babylon