The Richest Man in Babylon: Timeless Financial Lessons

The Richest Man in Babylon is known to be a classic personal finance advice source. The book was written in 1926 and the lessons are shared through parables that take place 4,000 years ago! So how could a book written 94 years ago that takes place 4,000 years ago be a relevant source of advice in 2020?

As a rising college senior, it seemed like an appropriate time to read The Richest Man in Babylon and see if there was anything I could learn from it. After reading it I realized that I could have honestly benefited from this a few years ago too. Although, the book was written in 1926, I was surprised that the advice it offered was just as relevant in 2020! It made me realize that although times may change the financial basics will continue to be the same; so it is important that we know them well to have a strong foundation for our financial journey. Here are my biggest takeaways that and will help you no matter where you are in your financial journey.

From the 7 simple rules of money:

Start thy purse to fattening: save money

Save 1/10 of your income to pay yourself instead of paying others by buying things. It is easy for us to believe that buying expensive things is a way of “treating ourselves”. We tend to think that’s all we work for. However, your money will never be able to grow if you don’t initially save part of your earnings. The Richest Man in Babylon suggests 1/10 (10%) of any of your income as the minimum. Your savings amount should align with your goals; the more ambitious your goals are the higher your savings rate should be!

Control thy expenditures: don’t spend more than you need.

There are some things that are necessities, such as rent, utilities and food. But we have to realize that anything beyond that is not actually necessary. It is also important to remember; “That what each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary.” (The lifestyle creep!) However, we have the power to decide what kind of lifestyle we want to fund while keeping in mind that we should be setting aside at the very least 10% of our income, with no excuses!

We must be aware of how much we spend on discretionary items (unnecessary items) and have control over that spending. Budgeting is a great way to hold yourself accountable; its easy to think we aren’t overspending but we won’t know for sure if we aren’t keeping track. I began budgeting back in March and never realized how much I actually spent on a monthly basis until I saw it all listed out!

Make thy gold multiply: invest wisely. Guard thy treasures from loss: avoid investments that sound too good to be true.

Having savings is the foundation of a successful financial journey but holding on to it is not the most effective use of your money. According to the book, in order to make the most of your money you must invest it in safe and secure investments. Make sure to choose investments wisely and don’t invest in anything that sounds too good to be true. A current example of an investment that was too good to be true are the loom circles that came about on social media. The loom money circles that promised an instant $800 return for a $100 investment should have immediately made you question its authenticity! Investing those $100 in the stock market could bring more real returns if invested in an ETF or mutual fund.

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

Do not settle for what you have and assume it is all you can do! Strive for more and work for it by learning more. In the book, a man tried to get a raise simply by asking his employer multiple times and it never worked for him until he realized he had to learn more and work faster in order to become better at his job. With his new skill, he was able to receive a raise without even asking for it. This can apply to your career or just in general. The more you know the better able you are at making decisions.

This is another reason why we stress the importance of financial literacy. Coming from immigrant communities may mean that our knowledge about money is limited to what we saw around us. This should not be what limits us from growing our wealth especially with how accessible information is now. The more you know the better you will be at handling your money and making it work for you.

The Gold Lender of Babylon:

This portion of the book explains safe lending and what you need to think about before lending and borrowing money. One line that stood out to me was: “If you desire to help thy friend, do so in a way that will not bring thy friend’s burdens upon thyself”. This basically means do not lend money to those in need if you know they will not be able to repay you and that would end up affecting you. If you can afford it maybe it should be considered a gift, if not then think twice before loaning someone money.

It also mentions something that I think might even be more prevalent today with the easy access to credit: “Youth is ambitious. Youth would take short cuts to wealth and the desirable things for which it stands. To secure wealth quickly youth often borrows unwisely”. This unwise borrowing is commonly seen from people who want to own brands such as Louis Vuitton, Chanel and Gucci but can’t even afford it yet, so they purchase it on credit and end up paying more than these items are worth. Although these things might make you seem wealthier while you own them, they may end up risking your future wealth and financial stability; which is 1000x more important!

A few of my favorite quotes:

“It’s simple to say, but many people never achieve a serious measure of wealth because they never seek it. They never truly seek it, focus on it, and commit to it”.

This quote simply means that your financial journey will not take care of itself. Like anything else, we need to put the work in to see actual results and growth. This is a problem that many people have and I could honestly say I am guilty of. For the past few years, I have been making some money but have not been doing anything other than saving it. If I had invested some time into financial literacy I could have had an efficient budget, built up my credit score, invested some money, and maximized my earning power. However, it is never too late to decide to build better habits for your future.

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

This was one of the most important lessons that I could not leave out . You may be surprised to figure out how much you can achieve when you follow a strict plan and work towards your goals. I have heard many amazing stories of people paying off six-figure debt, it is not impossible! Of course, this doesn’t mean get yourself into six-figure debt. However, deciding where you want to go on your financial journey AND what you’re going to do to get there is a great first step.

Should you read The Richest Man in Babylon?

The lessons in this review are the ones that most impacted me but there are so many more that I could not cover! You can access the Richest Man in Babylon for free online and it is a very quick read so it is definitely worth the time. I recommend it to everybody, even those younger than me because it can be very beneficial to learn about money matters as soon as you start making any, if not sooner.

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