While Money cant buy happiness, it certainly lets you choose your own form of Misery.
– Groucho Marx
The Richest Man in Babylon is a well known book in the finance & investment world. Considered to be one of best books on wealth creation, it explains rules in an easy to understand language.
I consider this book as a guide to anybody who has an aim to build wealth in the long term. The ideas are good for young and old. Rules are simple that can be easily applied as you go on reading the book.
The book is divided into more or less 2 parts:
- 7 Cures For a Lean Purse
- 5 Laws of Gold
Along with them are couple of chapters that deal with the topics of Luck, Practicing Caution / Protection, Role of Determination.
I will explain what I understood from these rules and try giving examples for the same:
7 Cures for a Lean Purse
- Start thy purse to fattening
- Control thy expenditures
- Make thy gold multiply
- Guard thy treasures from loss
- Make of thy dwelling a profitable investment
- Insure a future income
- Increase thy ability to earn
- Start thy Purse to Fattening: It suggests to save 1/10th of your income. While one may be predisposed to acquire material possessions, it is always a good idea to save 10% of your incomes.
- Control thy expenditures: It suggests that one must control their expenditures. It is a common urge for unnecessary expenses to expand equal to our incomes but we must avoid this insinuation.
- Make thy gold multiply: Since you will have additional money at your disposal as per Rule #1, you must put this money to work by investing it into instruments that give regular streams of income. This could be stocks, bonds, mutual funds, giving funds on loan to others etc.
- Guard thy treasures from loss: It suggests us to be extra cautious while investing money into schemes or giving on loan. It also proposes to consult a person who is expert in the field that you intend to invest in.
- Make of thy dwelling a profitable investment: It suggests to invest in buying your own home.
- Insure a future income: It suggests us to plan for the future and ensure income in the later part of life. It recommends us to either invest in pension funds or any property that will appreciate in the years to come or would give regular income for many years in the future.
- Increase thy ability to earn: It suggests that we must increase the domain knowledge in which we are working. We must continually learn and seek knowledge from others.
5 Laws of Gold
- Gold comes gladly and in increasing quantity to any man who will put by not less than 1/10 of his earnings to create an estate for his future and that of his family
- Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field
- Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling
- Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep
- Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment
Following were some of the concepts that I personally imbibed in my own life:
- Seek help from an expert for a trade that you want to learn (For matters of finance, I actively seek help and learn from my CA. I also try attend more seminars on skills that I seek to imbibe.)
- Create an asset that would help create an additional income stream apart from the job / business that you are into (I have increased my interests in the Share Market by actively looking at investing in High Dividend Yielding stocks)
End Note
The Richest Man in Babylon is an excellent book on the basics of managing your finance. I learned to save a fixed amount of money and keep it aside. I have seen how it has grown which has made me more confident to take larger risks in life.
Also, the idea to create future streams of income has motivated me to make 2-3 small changes in my life that will provide for me regular streams of income sometime in the future.
I do hope that you would be interested in buying this book. I would recommend anybody who is serious in building wealth and starting out their professional life to read this book. This book recommends good money habits that will help you create wealth for you and your family.
“Wealth creation starts doing small contribution consistently”
~RG~