The Richest Man in Babylon is a foundational book for anyone seeking to build wealth, retain their income, and be their own master.
This is a “back to the basics” book on personal finances. However, a reminder of the basics is valuable and many of us are failing to do them correctly (save 10%, make a budget, invest wisely, etc).
Before you purchase this book on Amazon or at Barnes and Noble, I highly recommend purchasing the Audiobook on iTunes or Audible narrated by Grover Gardner. What makes this book so interesting is the lessons are told in parables by one of Babylon’s wealthiest citizens, a businessman named Arkhad.
The narrator manages to employ a voice to make you think you’re listening to the real Arkhad from a thousand years ago providing you with ancient wisdom.
Arkhad teaches a group of men the basics of personal finances and how he became the richest man in Babylon.
He breaks it down into seven rules of money and five laws of gold.
Seven Rules of Money:
1. Start thy purse to fattening: Save 10% of your income.
2. Control thy expenditures: Don’t spend your money foolishly or on items you don’t need.
3. Make thy gold multiply: Invest your money
4. Guard thy treasures from loss: Ray Dalio, Warren Buffett, and Tony Robbins all go out of their way to stress this concept. Don’t lose your principal by investing in high risk long shots.
5. Make of thy dwelling a profitable investment: Own your house and if possible become a landlord rather than renter.
6. Ensure a future income: Protect your family with life insurance and build a nest egg capable of generating income for you.
7. Improve thy ability to earn: Learn, read, and explore to gain wisdom and sharpen your skills to earn more money.
Five Laws of Gold:
1. Gold comes easier to those who save 10% of their income.
2. Gold generates income for those who invest in ventures they are knowledgeable in and are safe.
3. Gold is retained when trusted with professionals who know what they are doing.
4. Gold is lost when invested in areas you do not have experience or knowledge in.
5. Gold is typically lost when invested in alluring investments promising absurd returns.
Our favorite take away from the book:
During one of Arkhad’s lessons, a citizen of Babylon asks Arkhad about the Goddess of Luck and the gaming tables.
Arkhad asks if anyone in the crowd knows someone who built their fortune while risking everything at the gaming tables… no one raises their hand.
He then proceeds to discuss how the Goddess of Luck may bless the common man.
Essentially, those who work diligently, consistently, and provide others with value will find their chances of “being lucky” increased.
Opportunities are also easier to seize when one has capital to invest in them.
By providing others with value and working hard, you attract new opportunities, referrals, and make wiser investments.
The Richest Man in Babylon’s point is pretty simple: Do the basics and you will build wealth over time.