“The Richest Man In Babylon” is a fantastic little book that really motivates you to get saving. It’s a cult classic that has sold more than two million copies and has people raving about it from all over the world. I picked it up for my husband after seeing it on Bill Gate’s Recommended Reading List, but I’ve actually come to love it myself as well!
It covers a lot of basic truths about money, and saving through a series of very readable short stories or parables, and touches on a lot of concepts that you probably know – and several that you’ve possibly never thought of! Originally it was a series of pamphlets that were given out at banks and other financial-related places, but has been collated into a great little book that I really can’t stop raving about. It’s very affordable, for the precious gems of wisdom that it holds, and can be bought here.
I can’t recommend it strongly enough.
Here are a few lessons that stood out for me:
- 10% off what I earn is mine to keep. Also known as the “Pay Yourself First” mindset. In the story the main character is confused at this advice, replying “Isn’t everything I earn mine to keep?” He is called an idiot by the rich man, who points out that from his earnings he gives some to the garment maker, some to the baker, and on and on until he’s living paycheck to paycheck, IF, however, you treat yourself as a payee, and give yourself 10% to put into savings and investments, you should be able to adjust your living expenses as if that wasn’t there. This has definitely proved true for us as we don’t notice our student loan deductions, or KiwiSaver deductions – and now our savings deductions either, as we budget our expenses as though it isn’t there.
- Make slaves out of every dollar you save. It’s not doing much good if it’s sitting there slowly corroding away with inflation. Even in the bank if it’s collecting interest it’s usually just keeping it’s value with interest, but it isn’t exactly growing. We’ve talked to an investment adviser, and his advice was look after your debt first – pour everything you have into your mortgage, particularly, because any amount you get back from investments (which can fluctuate) won’t equal the interest you’re paying on your mortgage. Once that’s done, look into investments that will grow your savings for you. Which brings me to the next point:
- Everyone is willing to give advise, but make sure you only take what is worthwhile. Go to the financial advisers for finance advise, and so on depending on what their specialty.
- You will become good at whatever you put your effort into. In the story the chariot-maker and the bard were forlorn over why they had worked for years and had no wealth. They came to the conclusion that the chariot-maker did not have wealth because he had put all of his effort and time into making the finest chariots, and the bard had mastered his instruments and voice – but neither had dedicated the same passion, focus or energy into learning about money – how to make it and how to keep it – and so they went to ask advice off the one person who had: the Richest Man in Babylon.
- It’s never too late. This is one of the most empowering things in the book. Both the bard and the chariot maker are fairly old with families and well established career paths – but t’s not too late for them! Even the Richest Man in Babylon blew his savings a couple of times on dumb mistakes, but he persevered until he made it. Repeatedly in the book, wealthy men lose everything to become slaves, and slaves through effort and perseverance build their way up to wealth. It has little to do with fate or luck, and everything to do with wisdom and it’s application.
The rest I’ll leave as a mystery until you read the book – check for it in your local library or buy it (the link again is here).