Personal Finance Advice Doesn’t Age
Lessons from the Richest Man in Babylon can still be found in modern financial books
The Richest Man in Babylon is a collection of parables set 4,000 years ago in ancient Babylon. The parables in the 1926 book by George S. Clason are told by a fictional Babylonian character called Arkad. Arkad started as a poor scribe but quickly became the richest man in Babylon using the “Seven Cures” and “Five Laws of Gold” rules. I have read a fair few personal finance books — and certainly many of the most popular ones who are referred to frequently in Medium. Indeed, many of the lessons from these popular books can be found in The Richest Man in Babylon but have been spun off into more elaborate stories and the lessons expanded upon.
The original 1926 book groups the parables into general themes of advice, and particularly “The Seven Cures” and the “Five Laws of Gold”. Let’s go through some of these in turn and compare them to more modern personal finance books:
The First and Second Cure: Start thy purse to fattening and Control thy expenditures
Arkad advises on saving 10% of your annual income to start building up your wealth (or purse): “For every ten coins thou placest within thy purse take out for use but nine. Thy purse will start to fatten at once and its increasing weight will feel good in thy hand and bring satisfaction to thy soul”. Similarly, Arkad advises against luxury expenditures that ultimately become confused as necessities: “The gold we may retain from our earnings is but the start”, and, “What each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary”, and, “Confuse not the necessary expenses with thy desires”.
The Latte Factor was published well after the Richest Man in Babylon in May 2019. The main theme of the book is that you have to pay yourself first. Every month we pay everything we have to — taxes, mortgage or rent, bills — and buy a lot of small things as they come to our mind. At the end of it, if there’s some money left, we maybe buy ourselves something that we really care about. To get the best out of your income, you should reverse your routine. Every month, first set aside the money to build your financial independence, then pay the rest. This will probably mean renouncing to some treats like eating at your favorite restaurant. But it’ll allow you to accomplish far more ambitious projects.
The Third Cure: Make thy gold multiply
Arkad advises to invest and to compound the investment return from these savings: “The earnings it will make shall build our fortunes … Learn to make your treasure work for you. Make it your slave. Make its children and its children’s children work for you”.
Now doesn’t this sound familiar to Rich Dad Poor Dad? Although Kiyosaki published his infamous book in 1997, the key lesson remains the same: invest in assets. The story has been embellished by comparing a rich dad and a poor dad to illustrate how the rich people acquire assets whilst the poor and middle class acquire liabilities that they think are assets.
Thinking about wealth
The novel starts with Arkad contemplating his life and finances. He realizes that his efforts to work hard at his job are not affording him the luxuries and wealth he desires. Indeed, Arkad only starts to build his wealth after thinking: “The reason why we have never found a measure of wealth. We never sought it.” As his desire for wealth increases, he realizes that “Will power is but the unflinching purpose to carry the task you set for yourself to fulfilment.”
Think And Grow Rich (1937) exactly encapsulates this state of mind. It exploits the power of thought to manifest strong desires and a definite purpose into reality. Turning your all-consuming obsession (definite purpose) into a reality is not an easy task. However, if the desire is strong and you’re willing to raise the stakes, you will win.
Conclusion
There are many personal finance books out there and the lessons will be retold in a myriad of captivating stories. However, The Richest Man of Babylon is a good place to start with advice that has stood the test of time. The book is very short (less than 200 pages) and a good place to start dipping your toes into personal finance literature!
