PDF Summary:The Richest Man in Babylon, by George S. Clason

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A word about success: Success is what you accomplish through your own efforts and abilities. It requires effective preparation, based on wisdom and understanding. If you desire financial success—to obtain money, keep money, and grow your money—following the principles will get you there, even if you’re struggling with debt.

(Shortform note: To make the message of the book clearer, we have reorganized the material to present Clason’s principles of money management first, followed by parables showing how people apply the principles at different points in history to illustrate their timelessness.)

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In the 1980s, Iraqi dictator Saddam Hussein built a $5 million replica of Babylon’s royal palace on top of the historic ruins, to the dismay of archeologists. On some of the bricks, he inscribed: “Built by Saddam, son of Nebuchadnezzar, to glorify Iraq.” The ruins suffered further damage in the U.S.-Iraq war.)

Although the ancient city is gone, the financial wisdom that took root there remains useful:

• We measure success by money.
• Those who understand the laws for acquiring money and growing it become rich.
• The same laws that governed money in ancient Babylon govern it today.

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Live within your means 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. What you define as necessary will always expand to keep pace with your income unless you resist.

Remember that the purpose of a budget is to grow your wealth while ensuring that you have the necessities and a few things you enjoy—without exceeding nine-tenths of your income. A budget shows you the potential “leaks” in your wallet, so you can stop them by maintaining control of your spending.

3) Put Your Money to Work

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’s 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.)

Just be sure you invest...

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He got a job managing a crew of slaves who were building a city wall and, in accordance with the laws of gold, he saved part of his earnings. His boss noticed his frugality and offered him a solid investment opportunity. Following the third law about heeding competent advice, Nomasir agreed to participate. Realizing that when the city wall was finished, a gate would be needed, the men pooled their resources to purchase metal from distant mines, which they sold to the king for the gate at a profit. Over time, the group joined in other successful ventures after careful analysis, and Nomasir was able not only to recoup his father’s money, but also to triple it.

Arkad was pleased with the return on his investment in Nomasir and entrusted his son with management of his estate.

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• Someone with a track record of good decisions and prompt repayment is a good risk.
• A person already in debt is a bad risk.

Mathon’s final piece of advice on lending was that it’s better to be cautious than to suffer regret later. Not willing to risk losing his money, Rodan ended up declining his sister’s request.

Make Sure You’re Protected

Always take steps to protect yourself against possible setbacks and tragedies in life. In ancient times, the city of Babylon protected its more than 100,000 citizens from enemy attack by maintaining strong walls. This paid off when the Assyrians attacked the city while the king and most of his forces were far away on a campaign against the Elamites.

The small force that remained behind to protect the city took heavy casualties and the enemy’s efforts to breach the walls were relentless. For over three weeks, the defenders held off the attackers and Assyrian bodies piled up outside the walls. Finally, when dawn broke during the fourth week, city residents saw clouds of dust in the distance as the attackers retreated. The attack was over and the walls had held.

**People need wall-like protection from the unexpected in many...

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In a letter to his archeologist colleague, Professor Shrewsbury reported successfully applying the same principles. Shrewsbury and his wife had become mired in debt and felt hopeless. He worried that his creditors might go public and he’d be forced out of his position at the college. So, following Dabasir’s process, he made a list of his creditors and what he owned each of them. He visited them and presented his repayment plan, to which they agreed. By paying himself 10%, he began accumulating money for the first time in years. He invested it wisely so it would grow, while living frugally and paying down his debt. He and his wife vowed to never again spend more than 70% of their income. Thus, financial advice thousands of years old proved to be timeless.

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One day the foreman came and told Nada he’d been ordered to take Nada back to Babylon. When they got there, Arad Gula was waiting for him and purchased his freedom. Gula had purchased his own freedom earlier and then searched for Nada so the two could become business partners. For both of them, work and saving money were the keys to freedom and financial success.

The youth, Haden Gula, was impressed with the story of his grandfather’s and Nada’s perseverance, which he vowed to emulate so he, too, could be a successful and honored man. As he and Nada approached the city of Babylon, he dropped back in the caravan and rode behind Nada as a sign of respect.