The financial classic, “The Richest Man in Babylon” written by George S. Clason was first published in 1926. It is set in the ancient city of Babylon and it’s a very compelling story about the basics of building wealth.
The story focuses on the characters Bansir, a chariot builder and Kobbi, a musician. Though regarded as masters of their respective trades, they remain poor. Dissatisfied with their lot, they seek advice from their childhood friend Arkad, who in stark contrast has become very rich.
Arkad’s advice is clearly the basis of the book and provides the very simple yet vital principles in how to build enduring wealth. It reveals the secrets of how most rich people become rich and stay rich. The amazing simplicity, consistently applied, enables us all to, at least, develop the key behaviours to financial independence and ultimately serious wealth.
Arkad tells Bansir and Kobbi of how he too was locked in to a cycle of poverty despite being a highly skilled scribe. His life changed when he made a deal with a rich man to provide free labour in exchange for insights in how to become wealthy. ”I found the road to wealth,” the rich man said to him, “when I decided that a part of all I earned was mine to keep. And so will you.”
The rich man's advice is extremely powerful. You will never be able to accumulate wealth if you cannot generate a surplus income. Most people are trapped into spending first and saving last. The problem is that dealing with income in this order means that there is rarely any surplus to put away. This is the poverty trap in which Bansir and Kobbi found themselves.
Arkad’s amazingly simple secret is to “Start thy purse to fattening" by paying ourselves 10% of all that we earn. Of every dollar that comes your way, 10 cents should go towards paying YOU before absolutely anything else is paid – without compromise - no matter what. The only sure way to create a surplus is to put some money away before you spend even a penny on ANYTHING else.
Now 10% doesn’t sound like much. Ask yourself if you managed to save 10% of all your income last year. If you managed that, did you do it the year before? Or the one before that? If you could do that for a few years how much would that be? The best way to make this sort of saving a reality it to make it a habit. Put your money to work and out of reach of daily temptation.
By putting away 10% of our income upfront, can we find clever ways to measure out the remaining 90% of our income? Arkad advises to "Control thy expenditures …budget your expenses so that you may have money to pay for your necessities, to pay for your enjoyments and to gratify your worthwhile desires without spending more than nine-tenths of your earnings.”
The best advice to becoming wealthy is to keep expenditures down even when our earning power increases. Most of us lack the discipline to save more as we earn more. Even maintaining the 10% rule on increasing earnings can be difficult. Controlling expenditure means ALWAYS living within our means so that we accumulate wealth faster.
"Increase thy ability to earn” said Arkad. The best way to increase earnings is to increase our value to others. By adopting the key behaviour of continuous improvement through learning and development you will increase your personal skills and in turn become more valuable to employers who pay you.
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