In a world where we are constantly bombarded to buy the latest and the greatest, it’s easy to over-extend and get into debt. The new I-Phone 6 will be out and many will trade in their I-Phone 5 for the simple reason of wanting the newest gadget. If you have the cash, there is nothing wrong with enjoying your hard earned money. But, if you are putting it on your credit card that already has a balance, you are in for trouble. One of the few books that I have read three times over is, “The Richest Man In Babylon.” It is a brilliantly written book and one that its parables should be followed by all. In its simplest terms, the book recommends the following:
The Babylonians were the first engineers, astronomers and mathematicians. They were also the first to have a written language which they carved into clay tablets. Whole libraries of these tablets have been found by archaeologists. It was upon these tablets that they recorded all of their stories.
The Seven Cures for a Lean Purse
“If you have a great desire for wealth and take advantage of opportunities available to everyone, anyone can become wealthy.”
The First Cure. Start thy purse to fattening.
The first cure is the principle that we call “pay yourself first”. Keep 1/10th of everything you earn. This money is the part of your earnings that you will invest.
The Second Cure. Control thy expenditures.
A lot of folks ask how they can keep 1/10th of everything they make, if they can’t cover their day to day expenditures. The advice given in this book is the same advice that any financial planner would give you today. And that is, keep cutting until you have a “balanced budget” in spite of the pain.
The Third Cure. Make thy gold multiply.
This principle points out that you must invest wisely to grow your money. After you are disciplined to save 1/10th of all you earn and have your expenditures in line, then it is vital to invest the money you are putting aside so that it will work for you and grow. Thousands of years ago, the Babylonians understood the “power of compounding”. While they describe it differently, the principle is still the same.
The Fourth Cure. Guard thy treasures from loss.
The basis of this principle might be compared to what we call “if it seems too good to be true it probably is”. It reminds us not to been tempted by opportunities that seem to be a shortcut to wealth; to invest only where our principle is safe, where we can get our money back if we desire, and where we will make a good return.
The Fifth Cure. Make of thy dwelling a profitable investment.
The men of Babylon were encouraged to take part of their earnings and buy a home. They understood that this would not only make for a happy family, but that owning property was indeed a wise investment that would help them to grow richer.
The Sixth Cure. Insure a future income.
This principle is about making preparations for when you are no longer young (for retirement) and for a possible time that you might no longer be with your family should you die. The sixth cure talks about investing in real estate as a means for providing future income. It specifies that all men should make regular payments in order to pay off the mortgage on the property in a timely manner. This would insure that he had “treasure” for his old age and for the protection of his family, no matter how prosperous his business and his investments may be.” Accumulating wealth from real estate was to be in addition to other earnings from business and investments.
The Seventh Cure. Increase thy ability to earn.
The seventh and final principle addresses the idea that we all need to increase our capacity to earn. The book states that preceding any accomplishment must be desires which are strong and definite. In addition to the strong desires, you must have a plan that is easy to execute. It cannot be beyond a man’s training or be so complicated that he will be defeated.
The value of additional education is also addressed as well as the value of a good work ethic. The seventh cure points out that wealth is accumulated first in small sums, then in larger ones as a man learns and becomes more capable. Even 8000 years ago, they understood that “the more you know the more you can earn”.
No book about money would be complete without touching on the subject of debt. The Richest Man in Babylon talks about debt and the negative effects it has on your life as well as the principles for getting out of debt. The formula laid out in the book states that 1/10th of all earnings should still be put aside even if you have debt. You were then instructed to take 2/10ths of the remainder of your earnings and use this to pay on your debt until it was paid in full.
As you can see, the principles for sound money management are pretty much the same today as they were 8000 years ago. I would encourage anyone that hasn’t read this book to pick up a copy today at your local book store