7 Steps to Wealth from 90 Year Old Book but Still Relevant Today
It’s amazing how timeless certain wisdoms and tips are. Many even remain valid for decades or centuries. A good example is the classic “The Richest Man of Babylon” by George S. Clason from 1926. The author uses parables from ancient Babylon to describe how money can best be multiplied. He begins his story with Arkad, a modest and simple merchant with no chance of a significant legacy. Nevertheless, Arkad manages to build up a fortune and eventually becomes the richest man in Babylon. To turn Babylon into the most prosperous city in the world, the king asks the clever Arkad to share his secrets of miraculous wealth multiplication with the Babylonians. Arkad agrees and teaches 100 men his “seven recipes for a thin wallet”. And these are just as relevant today as they were 90 years ago.
1. Start making your wallet FATTo get rich, you have to pay yourself first. Arkad therefore recommends setting aside ten percent of your income. In the shortest time possible, the wallet should become fatter. Anyone can use this technique, regardless of whether they are rich or poor. You only have to be disciplined, he said. Today, of course, technology also helps here: many online accounts offer a function via standing order with which you can automatically transfer ten percent of your income to another account to save money.
2. Control your expensesThe next step is to control expenditure. Because it is often more difficult than you think to spend less than you earn – especially in the modern consumer society that encourages generous spending. In addition, every time your salary increases, your expenses usually rise as well. Experts call this phenomenon “lifestyle inflation”. Even Arkad already knows in the “Richest Man of Babylon” that our “necessary expenditures” are constantly rising – unless we vigorously resist it. Because often we would confuse really necessary expenses with desires and longings. In order to control your expenses, you must first create an awareness of what exactly you are spending and on what. A good first step is logging all expenses – this can be done on a writing pad, on a computer with Excel or on a smartphone with an accounting app. Only when you know exactly what you’re spending your money on can you start using the red pen, Arkad teaches. That’s how millionaires think and become rich.
3. Let your “gold” work for youThose who have managed to reduce their expenses and set aside at least ten percent can finally start to increase their wealth. “The gold we keep is just the start,” says Arkad, “what it yields should be the basis for your wealth. Make it your slave.” Transferred to the present time, you should put your money into a traditional investment plan where the money on the stock exchange or in fixed-interest investments can grow continuously over the years. Most importantly, the sooner you start investing, the better.
4. Protect your wealth from lossesWhen investing, however, there is always a risk. It is therefore crucial where and how the savings are invested. “The first principle in investing money is security for the investor,” says Arkad in old Babylon. And he asks: “Is it wise to be tempted by high returns if this endangers the entire investment? Of course not! The penalty for too high a risk is losses, according to the “star investor” from Babylon. He advises therefore also to inform himself comprehensively before the investment. Investor legends of our time also share this advice. Investing is a long-term undertaking, and with a “how do I get rich the quickest” mentality one can easily fall on one’s nose, says Warren Buffett. Inspirational quotes on wealth from successful people
5. Make your home an investmentEveryone should try to have a roof that protects them and their families,” the antique investment advisor tells his 100 students. “For a man with good intentions, owning his home is not out of reach. Today, the question of “buy or rent” is often the subject of heated debate and there is no clear opinion as to what is better. Arkad only says this much: “Whoever owns his own home and makes it a place he proudly looks after, feels more self-confidence and puts more effort into all his efforts. Of course, before you start buying a house or apartment, you should check exactly what you can afford.
6. Ensure your future income“The life of every human being progresses from childhood to old age,” Arkad teaches on the sixth day of his course: “Everyone should therefore make preparations so that their income is guaranteed for future days. Today, this security for “future days” is provided by the pension plan/mutual funds/equities. Time plays the biggest role here: the earlier you start saving for investment, the bigger the pot will be in the end – above all thanks to interest, yields and compound interest. This way close relatives are also provided for in the event of your death, additional life insurance policies are recommended. Read on what distinguishes millionaires from ordinary individuals
7. Increase your ability to earn money“The more wisdom we acquire, the more we can earn,” Arkad explains, “Anyone who finds out more about their profession and learns more and more will be rewarded princely. We can still observe the implementation of this wisdom today: Many people who have already achieved everything remain inquisitive and hungry for learning. Star investor Warren Buffett, for example, spends 80 percent of his time reading – and this obviously helps his sense of good business. Thanks to the wealth of books, podcasts and online resources, it’s easier than ever to constantly acquire new knowledge.
Hi, I am Nikesh Mehta owner and writer of this site.
I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business.