{"id":44723,"date":"2021-08-01T08:10:00","date_gmt":"2021-08-01T12:10:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=44723"},"modified":"2021-08-09T11:41:19","modified_gmt":"2021-08-09T15:41:19","slug":"7-cures-for-a-lean-purse","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/7-cures-for-a-lean-purse\/","title":{"rendered":"The Richest Man in Babylon: 7 Cures for a Lean Purse"},"content":{"rendered":"\n

What are the “7 Cures for a Lean Purse”? How did Arkad\u2014the richest man in Babylon\u2014come up with his wealth principles? <\/p>\n\n\n\n

The 7 Cures of a Lean Purse are the financial principles of Arkad, a fictional character in the Babylonian parables<\/a> titled The Richest Man in Babylon<\/a><\/em>. Arkad, who began his wealth journey as a poor scribe, came up with these principles when his friends approached him for advice on how to grow wealth<\/a>.<\/p>\n\n\n\n

Here is a quick synopsis of Arkad’s wealth principles. <\/p>\n\n\n\n\n\n\n\n

The Story Behind the 7 Cures for a Lean Purse<\/h2>\n\n\n\n

Arkad, a fictional character in the Babylonian parables, is described as \u201cthe richest man in Babylon.\u201d Two friends, Bansir and Kobbi, a chariot builder and a musician, get tired of working hard to get by without ever improving their status. So, they gather some additional friends and approach Arkad for advice on how to become wealthy<\/a>. Arkad, who began his working life as a poor scribe, obliges by recommending \u201c7 Cures for a Lean Purse.\u201d<\/p>\n\n\n\n

1) Pay Yourself First<\/strong><\/h3>\n\n\n\n

Save 10 percent of everything you earn, even if you\u2019re in debt, to start building wealth<\/strong>. You\u2019ll find that you get along just fine on 90% of what you earn and in ten years, you\u2019ll have saved a year\u2019s earnings. To visualize this, think of collecting ten eggs every day. Each evening, take nine from the basket to sell and keep one for yourself. Eventually, your basket will overflow because you\u2019re putting in more eggs than you\u2019re taking out.<\/p>\n\n\n\n

Only the money you consciously set aside is truly yours. You may think all of your earnings belong to you, but when you don\u2019t save a portion, you give them to everyone but<\/em> yourself. For instance, they go to your grocer, your landlord, your shoemaker, etc.<\/p>\n\n\n\n

Although you\u2019ll be tempted to spend your savings at times, remember that spending brings only temporary gratification, while saving builds long-term wealth and security. And the person who saves part of his earnings will find it easier to acquire more money.<\/p>\n\n\n\n

2) Control Your Spending<\/strong><\/h3>\n\n\n\n

After you save a tenth of your earnings, determine your necessities and create a budget to cover them<\/strong>, plus a few worthwhile things you enjoy, not exceeding the remaining nine-tenths of your income. Don\u2019t confuse wants with needs. If a pack animal got to choose his burden for a long trip, he\u2019d choose to carry grain, hay and water\u2014necessities\u2014rather than gold and jewels.<\/p>\n\n\n\n

Live within your means<\/a> or, better yet, live below your means. Should your earnings increase, beware of lifestyle inflation, which is the tendency to increase your spending as your income increases<\/strong>. What you define as necessary will always expand to keep pace with your income unless you resist.<\/p>\n\n\n\n

Remember that the purpose of a budget is to grow your wealth<\/strong> while ensuring that you have the necessities and a few things you enjoy\u2014without exceeding nine-tenths of your income. A budget shows you the potential \u201cleaks\u201d in your wallet, so you can stop them by maintaining control of your spending.<\/p>\n\n\n\n

3) Put Your Money to Work<\/strong><\/h3>\n\n\n\n

The money you accumulate from your earnings is just a starting point. You need to put it to work in ways that earn more money by investing it or multiplying it by taking advantage of compounding interest over time. (Shortform note: Here\u2019s how compounding works: when you invest or loan out your money, you receive interest on your deposit. The next year, you earn interest on both the original deposit and on the interest you earned on it in the first year. Each year, your money multiplies as you earn interest on your interest.)<\/p>\n\n\n\n

Just be sure you invest wisely, with people of honor and experience. When he was starting out, Arkad made a good investment. He loaned money to Aggar, a shield maker, whom he knew to be a man who knew his business and paid his debts. The loan enabled Aggar to order a large supply of bronze at a good price. When Aggar successfully sold all the shields he had made with the bronze, Arkad got back the loaned money plus interest. As Arkad\u2019s capital increased, he made more loans and investments, thereby continually increasing his wealth.<\/p>\n\n\n\n

By investing your money, you create a continuing income stream\u2014your money is working for you whether you are working, traveling, or retired.<\/p>\n\n\n\n

4) Protect Your Principal from Loss<\/strong><\/h3>\n\n\n\n

The first thing to do with money you\u2019ve saved is to protect it. Invest it only where your principal is safe and you can get it back if you want to and where you\u2019ll get a fair interest rate.<\/p>\n\n\n\n

There are many ways to lose money you\u2019ve saved:<\/p>\n\n\n\n