The Richest Man in Babylon was written in 1926 but it still holds a lot of relevance! Almost everything that is written in this book will help you same good money and create enormous wealth.
The book has a simple solution to create wealth and yet these solutions might look difficult to implement. I have read this book once and recently heard its audiobook.
Let me share some of the key takeaways:
The book shares the following 7 cures for a lean purse –
Save at least 10% of what you earn – “Start thy purse to fattening.”
Learn to live below 90% of your income. A minimum of 10% of the income should be saved in form of investment for the future.
Saving is the key to wealth creation. Only when you save you can invest and only when you invest you create wealth!
Control the expenditure – “Control thy expenditures.”
Avoid buying unnecessary things and avoid spending on luxury. Luxury is often confused with necessity. Also, one should not confuse the necessary expenses with their desire.
Invest what you have saved – “Make thy gold multiply.”
One should invest the money saved to enjoy the benefits of compounding. Earnings from these investments will build fortunes.
Protect your wealth – Insurance will protect it – “Guard thy treasures from loss.”
Analyze the risk associated with your investments. Avoid getting rich schemes. Buy insurance to protect your wealth. Some people prefer managing their own risk by hedging their investments which is not a bad idea either.
Your home is your profitable investment – “Make of thy dwelling a profitable investment.”
The book suggests one should buy a home where he lives. This is a bit different from the modern-day thinking of living in a rented apartment. Choose whatever you like but the main point is not to splurge and to buy or rent a home that is affordable.
Retirement plan – Ensure a future income.
There will be a time in life when one won’t be able to do many things and would also retire. For this time one should plan and save sufficiently so as to create a good amount of wealth that can be used for retirement. This wealth can be created by investing in stocks, properties, or anything with value.
Most importantly, never stop learning – Increase thy ability to earn.
Always polish your skills and learn add-on stuff. The best returns are often fetched by investing in oneself. Constantly educate yourself. Thanks to the internet this is no more difficult, you can learn so many things online from different people.
The book focuses a lot on saving, protecting wealth, retirement planning, investing. It covers most of the parts of a financial plan. This book is a must-read if you are just about to start your career.
I had previously written on the most important lesson in personal finance and had used a couple of ideas from this book.
And if you have not read 30 days to improve your financial life, I recommend you read it now and act on it.