The Richest Man in Babylon by George S. Clason is a financial advice classic written in the 1920s. It presents timeless principles for managing your money in the form of “Seven Cures for a Lean Purse” (how to acquire wealth) and “Five Laws of Gold” (how to preserve and grow wealth). The principles are illustrated by parables set thousands of years ago in the wealthy city of Babylon, where the basic ideas of finance were born.
Clason’s message is that if you work hard, save, live within your means, and invest wisely, you can become wealthy. He’s credited by some with being the first person to articulate the principle, “Pay yourself first.”
The financial principles in the book are delivered by the fictional character of Arkad, the richest man in Babylon, who imparts the secrets of wealth to a group of local citizens who want to learn how to stop struggling financially and become rich.
Arkad, who started his working life as a lowly scribe in Babylon’s hall of records, noticed that the scribes who produced more work received more pay. He worked to increase his speed and received more money himself.
Upon the advice of a money lender, Arkad began saving 10% of everything he earned. To his surprise, he didn’t miss having it available for spending. He created a budget and lived within his means. At first, he spent the interest earned on his savings—however, he later learned to put his money to work by earning more interest on his interest. He also looked for ways to invest. Except for the mistake of investing in the jewels that turned out to be fake, he increased his wealth gradually through wise investments.
Arkad became wealthy because he learned to:
The money lender put Arkad in charge of managing his land and other wealth. Arkad increased their value and eventually inherited a share of the estate. Thus, he became “the richest man in Babylon.”
Arkad explains to the group of Babylon citizens who questioned him that he became wealthy by implementing “Seven Cures for a Lean Purse.” The cures or principles for acquiring wealth are:
1) Pay yourself first. Save 10 percent of everything you earn, even if you’re in debt, to start building wealth. You’ll find that you get along just fine on 90% of what you earn and in 10 years, you’ll have saved a year’s earnings. Arkad teaches that you may think all of your earnings belong to you, but most of them actually end up going to your grocer, your landlord, and your shoemaker. Only your savings are truly yours. Although you’ll 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.
2) Control your spending. After you save a tenth of your earnings, determine your necessities and create a budget to cover them, plus a few worthwhile things you enjoy, not exceeding the remaining 90% of your income. When distinguishing necessities from desires, remember that if a pack animal got to choose his burden for a long trip, he’d choose to carry grain, hay and water—necessities—rather than gold and jewels. Additionally, lLive within your means or, better yet, live below your means. Should your...
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The Richest Man in Babylon by George S. Clason is based on a series of financial advice pamphlets Clason wrote in the 1920s, which were distributed by banks and insurance companies. He compiled them into a book in 1926, which is considered a classic. It presents timeless principles for managing your money in the form of “Seven Cures for a Lean Purse” (how to generate wealth) and “Five Laws of Gold” (how to preserve and grow wealth). The simple principles are illustrated with a series of parables set thousands of years ago in the wealthy city of Babylon, where the basic ideas of finance got their start.
Clason’s message is that if you work hard, save, live within your means, and invest wisely, you can become wealthy....
Babylon was one of ancient history’s greatest and wealthiest cities. It was built not on natural assets but by work and ingenuity.
It was founded in 2300 BC in Mesopotamia, beside the Euphrates River in a dry valley about 60 miles south of Baghdad in present-day Iraq. The area had little rainfall and lacked building materials such as stone and forests for wood.
The city exemplified humans’ ability to make the most of what was at hand—the only available resources were good soil and water from the river, and Babylonians took advantage of them. Engineers channeled water from the river to grow crops by creating irrigation canals and huge dams. Besides creating the irrigation system, they drained swampland at the mouths of the Euphrates and Tigris rivers for additional cultivation.
The city was built of brick...
Arkad, a fictional character in the Babylonian parables, is described as “the richest man in Babylon.” 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. Arkad, who began his working life as a poor scribe, obliges by recommending “Seven Cures for a Lean Purse.”
Save 10 percent of everything you earn, even if you’re in debt, to start building wealth. You’ll find that you get along just fine on 90% of what you earn and in ten years, you’ll have saved a year’s 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’re putting in more eggs than you’re taking out.
Only the money you consciously set aside is truly yours. You may think all of your earnings belong to you, but when you don’t save a portion, you give them to everyone but yourself. For instance, they go to your grocer, your landlord, your shoemaker, and so onetc.
The fictional character Arkad in The Richest Man in Babylon recommends saving a tenth of everything you earn. This is a time-honored principle, yet one U.S. survey has shown year after year that a majority of Americans (about 58%) have less than $1,000 in savings.
Do you save or “pay yourself” part of everything you earn? Why or why not?
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The “Five Laws of Gold” are revealed in a campfire tale by a wealthy camel trader, Kalabab. He starts by asking his audience which they would choose: a bag of gold or a clay tablet inscribed with wisdom. Everyone opts for the gold. However, he points out that without wisdom, they’d just waste the gold and end up back where they started.
Gold (or money), he says, accrues only to those who understand the laws governing it. Kalabab then explains five laws, which he says originated with Arkad, the richest man in Babylon. Arkad passed them on to his son, Nomasir, for whom Kalabab once worked.
(Shortform note: The laws of gold, which focus on building wealth, overlap with the seven principles for acquiring money.)
1) You acquire gold by saving regularly (at least a tenth of your earnings) to build wealth for a secure future.
2) Gold grows when you invest it, along with the interest you receive on it, wisely.
3) Your gold will stick around and grow if you follow competent...
The character Nomasir initially failed to follow the “laws of gold” and ended up losing money his father had given him. But he learned from his mistakes, started over, and eventually succeeded.
Have you ever made a financial mistake and lost money? What was your mistake? Did it violate one of the principles or laws of this book? How?
This chapter recounts three Babylon parables about managing your finances.
When a friend or family member asks for money, most people will help if they can—even if they have reservations about the wisdom of doing so. But this altruism can often cause new problems, dragging the helper into the friend’s predicament.
Rodan, a spear maker, found himself with this dilemma. The king had given him fifty gold pieces because he liked Rodan’s design for a new spear point for his guards. The payment was far more than Rodan expected to receive. Now his sister wanted him to loan money to her husband so he could open a store. Rodan had doubts about the husband’s business acumen.
Unsure of how to respond, he asked Mathon, a money lender, for advice. Mathon replied with a parable about an ox and a donkey. The ox complained to the donkey about having to work hard all day plowing the fields, while the donkey had little to do unless the farmer needed a ride somewhere. The ox was tired and wanted to rest, so the donkey advised him to pretend to be sick the next day, so he wouldn’t have to work. The ox did this, so the farmer gave him a day off. But meanwhile,...
Fast-forward to 1934. (Shortform note: 1934 is the date on the letter referred to below and quoted in the book. Since the copyright on the book is 1926, this story may be a fictional projection meant to show that the principles of the Babylonians are timeless.)
Professor Alfred H. Shrewsbury of the Department of Archeology at Nottingham University in England received five clay tablets from the ruins of Babylon, excavated by his colleague, Professor Franklin Caldwell. Shrewsbury translated their inscriptions and was surprised to find that they spoke to his own financial circumstances.
The tablets contained the story of Dabasir’s efforts to pay off his debts. The professor and his wife were deeply in debt, and Shrewsbury seized on the story as a lifeline. It was as follows:
Having escaped slavery, Dabasir returned to Babylon determined to pay his debts and become a person of...
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It’s easy to pile up debt. We live in a consumption-oriented culture urging us to buy things in order to be happy and have status. Also, necessities such as housing, transportation, and education are increasingly expensive. Average personal debt was $38,000 in 2018, excluding mortgages.
How much money do you owe, including a mortgage, car loan, college, and consumer debt? What is your current repayment plan? What percentage of your income does this reflect?
Sharru Nada, a wealthy and respected merchant of Babylon, was returning from a trip to Damascus to bring back his late partner’s grandson, whom he’d agreed to mentor.
The youth, Hadan Gula, was greedy, lazy, and arrogant and Nada worried that with his spendthrift ways, the youth was destined for a troubled future. So he decided to tell him the story of his partnership with the young man’s grandfather, Arad Gula, as a lesson in humility and how to succeed.
The youth was shocked when Nada revealed that he’d started his working life as a slave—his brother had killed a friend and his father bonded Nada to the friend’s widow, who decided to sell him.
On the way to being sold at a slave market, Nada’s fellow slave, Meggido, advised him to work hard because slaves who did good work were valued by their masters. If you convince potential buyers that you’re a good...