Table of Contents
Step By Step Proven Method To Become Filthy Rich.
The richest man in Babylon Summary: written by George S. Clason.
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If you are on this page, chances are that you want to improve your financial literacy and you are interested in the book.
Our busy lifestyle prevents us from reading as much as we should or want to. Yet the smart ones have linked success with reading habits. In fact, it has been said over and over again that to be successful, you must improve how many books you read.
Wealthy people who have reading as their superpowers
Bill gates read 1 book a week!
A study of 1200 wealthy people showed that they self educate by reading
Need more convincing? I hope not.
This review will contain many quotes from the book and then some of my own flavors in the interpretation of the book.
The book is old and the English is shakespearish. So I will do my best to translate into the new day English while still keeping the fun part intact. What do you expect? The book was first published in the 1920s.
The richest man in Babylon summary: Background story
3000 years ago, in the city of Babylon, a poor man named Bansir was sitting in front of his house. He was supposed to be working hard on a chariot he was making to sell.
However, he had a dream that he was the richest man in Babylon so he kept daydreaming all day instead of working.
His friend Kobbi, came to visit him and found him chilling on the couch. Kobbi said to Bansir since you are doing so well that you got time to rest, can you borrow me some money.
Bansir explained how he worked all his life but yet has no money for himself, not to talk of lending some to Kobbi. Bansir further lamented on how he worked with all his heart and built the best chariots in the entire land but still have no spare coin.
Kobbi had an idea! Why don’t we visit Arkad, the actual richest man in Babylon and ask him for some tips? Kobbi said he saw Arkad in his golden chariot on his way to Bansir. Arkad was known to be liberal in his spending and he gives a significant amount of his wealth to the poor, yet he became richer and richer.
Bansir and Kobbi met with Arkad and asked him how come they have labored all their lives and worked hard, yet have nothing to show for it. They even said they’ve worked harder than Arkad has.
Arkad answered them and explained that he was once a hard-working scribe but he made a deal with Algamish, a very rich man for the secret to wealth in return for scribing the copy of law into the clay. If you are interested in buying the book straightaway – here is the affiliate link on Amazon.
Concept of time
Time is abundant and it is the same for everyone. The same 24 hours that Bill gates have, is the same 24 hours that we also have. How come only a few become the top wealthy people? Instead of using time in a constructive way, many people just waste their time on activities that do not further their bottom line.
Start using your time wisely today.
7 cures for a lean purse
Step by step proven method to become filthy rich
1) Start thy purse to fattening: save money.
2) Control thy expenditures: don’t spend more than you need.
3) Make thy gold multiply: invest wisely.
4) Guard thy treasures from loss: avoid investments that sound too good to be true.
5) Make of thy dwelling a profitable investment: own your home.
6) Ensure a future income: protect yourself with insurance.
7) Improve thy ability to earn: strive to become wiser and more knowledgeable.
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1. Start thy purse to fattening: save money – Save 10 percent
I told you about the English. What is “start thy purse to fattening”? No fat shaming here, don’t be sensitive to the book. This in itself was enough to discourage some people from finishing the book.
For me, the word purse and fattening in the same sentence is exciting. I have to get to the bottom of this. If your English is too modern, well it means to save money in your purse to make it fat.
This is a variation of paying yourself first. No matter how much you earn, whether it is 1,000, 10,000 or 100,000, you need to pay yourself first. The earliest you save that 10%, the sooner the tree of wealth would be planted.
All the money you make is not yours to keep
Bansir and Kobbi asked Arkad – Isn’t all that I make mine to keep?
The answer is no! Only a part of what you earn is really yours. First, you pay the government, then you need to pay for the essentials like housing, food, clothing etc. Then for some, the non-essentials like new cell phone, the latest Ipad and that doctor car of yours.
In the book, Arkad said, even when he saved 10%, he did not notice a significant difference in his lifestyle. You will be surprised how much you waste money on when you start saving diligently.
Temptation came, and he wanted to spend it but he resisted. As time passed, he even started to enjoy saving, almost turned into an addiction.
Do I really have to save 10%
There are many variations of how much of your income you should save. The higher your income, the more you should save. I think the reason why the richest man in Babylon said 10% is that it catered mostly to people living paycheck to paycheck. Dave Ramsey catered mostly to the middle class and advocate 15%. As a high-income professional, your goal should be to save as much as possible. For example, we pay our debt, save or invest close to 40% of our gross. Interestingly, when it comes to net income, we save about 2 thirds.
What do you do in your own life, Dr narrator?
The strategy that helped us is that we max our retirement accounts first. We also take advantage of all the possible pretax savings available to us like the dependent care flexible savings account.
By doing that, the net income is much reduced. Then out of the net income, I automatically transfer a certain amount to the investment account to put it to work. Whatever is left in the joint account is up for spending.
I am not saying that we hit the target all the time. However, it is better to have a plan than no plan. If we aim for 66% and hit 60%, can you actually say that is failing? You decide.
Read more about our how we get this done from Mrs. Breathe Easy Finance. She explained how she survives her frugal husband. Juicy stuff from the frugal doctor’s wife perspective
Arkad love reverse budgeting
Ways to achieve the best result was alluded to in the book. Save first before spending. This means when you get that paycheck, take out the percentage to save and invest first and then spend the rest. You can start small if you think it is overwhelming.
This is called reverse budgeting.
In the typical budget, you go on a strict budget and then save the rest. As high-income earner, however, I don’t believe it is necessary to follow every dollar. If your spending starts to get out of hand and you are unable to save that predefined percentage, then go back to the typical budgeting.
If you do not make enough though, you must know exactly where every single dollar goes.
Learn more about how to budget your money to live the life you want.
Lessons and awesome sayings so far
You must constantly have an income that keeps your purse full.
It costs nothing to ask for advice from a good friend.
If you want something, seek out the knowledge for it.
Pay yourself first.
Only a part of what you earn is yours to keep.
Once you start saving, you will start to actually enjoy it.
Truth is simple
2. Control thy expenditures: don’t spend more than you make/need.
Another goody. It pains me to have to write about this principle. Live below your means. As said in the lesson above, the truth is simple, yet it is difficult to follow through. As my dad would say:
2 minus 3 does not equal 5. If you make 2 dollars and spend 3 dollars, you are digging a financial hole for yourself.
Simple, yet true.
Common questions that people ask or the excuse they give was the same as in the book.
How can I save, when my income is not enough for me to survive?
It turns out that low net worth does not necessarily correlate with how much you earn. There are many people who earn little and become millionaires and there are high-income earners who are poor and broke. This support the evidence, that finance is 80% behavior and 20% knowledge. In fact, in Millionaire next door, the unassuming people who work regular jobs are the majority of the millionaires.
Budget your necessary expenses, so you have enough money to pay for your necessities and then enjoy your heart desires.
Budget your necessary expenses, so you have enough money to pay for your necessities and then enjoy your heart desires. Share on XArkad advocates budgeting as said in the first step. Budget help you find where the leaky holes are in your wallet. Then, you have the opportunity to fix it. When we first started with budgeting, we could not figure out where about 1,000 dollars went every month. You will find expenses that can be limited or eliminated.
The excuse of not enjoying life and that you might die tomorrow, and then live the YOLO lifestyle is not tenable either. As said before, if you save 10% of your expenses, you most likely won’t even feel it. You can also budget fun activities too. For example, we have 6,000 dollars budget for traveling every year for now. So it is up to us to go to Europe once or travel to Dallas multiple times. Whatever you do, do not spend your savings.
More lessons and sayings
Do not confuse need with wants
Saving does not take pleasure away from your life
Budgeting is important
Budgeting helps because you can plug the holes in your finances
Even if you are wealthy, you still cannot spend any way you like
3. Make thy gold multiply: invest wisely.
On the second try, Arkad invested his money into something that brings him passive income. However, he spent the returns of his investment on wine and awesome tunic. The type of investment he described sounds actually like buying shares in a company.
Algamish asked him – how do you suppose your money and the money children will work for you when you spend it on luxuries. If you keep doing this, you will never become rich. Making your money work for you is the actual secret to wealth.
There is a secret to this stuff. Invest and be wealthy first, then you can afford whatever you like and if you have passive income that is substantial, you can afford to splurge. Ok moderately.
Check out this post how to start investing as a beginner. We broke the process down for the babies of personal finance to digest easily
Invest in things you are knowledgeable about
Arkad insists that you should invest in things that you are knowledgeable about. If you want to invest in stocks, learn about stocks, if real estate is your fancy, and then start consuming videos, books and blogs about real estate.
Compound interest is the 8th wonder of the world
He discussed the concept of compound interest. Invest the principal and the interest. This way, both the principal and the interest gain even more interest.
A man’s wealth is not in the money he carries in his purse. It is in enslaving money to work for him.
The golden stream from golden slaves he called them.. Remember, this was Babylon and transactions were made in silver and gold.
Check out the post below for more information on compound interest and the time value of money
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4. Guard thy treasures from loss: avoid investments that sound too good to be true.
If you do not guard your treasure, you will lose it. Simple as that.
After Arkad has saved 10% of his income for a full year, he decided to give his money to a bricklayer who pitched an investment idea to him about buying some jewelry from a faraway land. When Algamish came back to visit him and asked if he listened to his advice, he proudly told him he saved the 10% and when asked what he did with it, Arkad said he gave it to a bricklayer to help him invest in jewelry.
Algamish broke it to him that he has essentially lost his money by investing in something that sounds too good to be true. Also, the person you want to invest with, you need to do your due diligence and be sure they are knowledgeable and have experience.
Algamish offered more advice.
Advice is freely given away. But watch and only take which is worth having. He who takes money advice from who is inexperienced in that matter will pay for it with his savings.
AKA do your due diligence. If it sounds too good to be true, you need to research it even more. And if you are unsure about it, don’t do it.
Don’t take too much risk with your money
Balance your risk and reward. It is better to take less interest and less risk of losing your principal. I grudgingly agree with him on this point. My own addition is that if you are young, and you have a longer horizon, to accelerate your wealth, you can take a few risks.
You can ask Mark Cuban for his rationale when he said diversification is for idiots.
Anyways, I diversify and invest in index funds.
However, I reserve about 5% of my income for random investments. Otherwise known as the “play money”.
I too fell into some hype with cryptocurrencies. Fortunately, I was able to recover most of my initial investment before it went south. While I still have high hopes for crypto, I just don’t feel like I have enough knowledge in that field to do really well in it.
Seek advice from experts
He also believes you should seek the advice of the financial experts. These are people who have walked the walk. Find a mentor in your financial journey. This is not to be construed as the financial advisors necessarily as Arkad said the advice was given for free in the book. Well, financial advisors are not free. I am not completely against financial advisors; you can see my view in this post
More lessons
If you fail, try again.
Learn from your mistakes
Only entrust your money to people who are knowledgeable and experienced in the business you are investing in.
Continue to learn from experienced people
5. Make of thy dwelling a profitable investment: own your home.
This one is tough for me to chew. From my prior posts, many might have labeled me as anti- house. This is not so. On the long run, it might be better to buy than to rent. Just follow the guideline listed in this post
6 times you should not buy a house
If you are free from debt, have a very good emergency fund, you plan to stay in the area for a long time, then it is a good idea to buy. Some also advocate for paying off your mortgage early but I am not a fan. However, if you want to be like the rich man in Babylon, you probably should own your house. Which means you should strive to pay off your house. This is the Nigerian style.
Check out this post to learn more on my background
One part Arkad emphasized was that having a place to name your own makes your family more comfortable, your children can play and go wild. That redecoration that was forbidden in your rental house, you can now do it. Your family will be happier in their own house. Money lenders and banks easily lend you money to buy a house because they know it is a good investment.
You reduce your cost of living and improve your cash flow if you own your home.
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6. Ensure a future income: protect yourself with insurance.
I was starting to worry if he insured his money at this point. Phew. Arkad did the right thing.
Plan for long-term and future days when you will not be able to earn money
Our days in this world are numbered. It is important to think about those future times.
Insurance is not a new concept. Even in the Babylonia times, investors have been insuring their assets.
You can only work for so long. There will be a day in which you will lose your ability to earn. Either due to sickness, injury and if lucky, due to old age. So it is important to insure your assets.
Think about your family. There will be a time when you would not be able to provide for them by working. So have some investment for the future. He was talking about disability insurance, retirement planning.
Read more from the post below
Financial pyramid, the ultimate personal finance guide.
Invest in assets that would still be there in the future.
First advise in the book. Don’t bury your treasures. I mean literally. Don’t dig a hole by a marked tree and put your money there. If you think that is absurd, it is just as absurd to keep your money in your house or in the bank without investing it.
A specific analogy in the book talked about is how a saddle maker named Ansan deposit 2 pieces of silver weekly for 8 years to a money-lender. The interest rate was 25% every 4 years. This comes to about 6.25%. After the 8 years, he had a total of 1040 pieces of silver. Ansan was proud of himself and he told Arkad. Arkad advised him to keep depositing 2 pieces of silver every week for the next 12 years after that. Ansan took Arkads advice and kept investing. After a total of 20 years, the moneylender told Ansan, that his money has grown to 4,000 pieces of silver. Come to think about it, 6.25% interest is pretty low but still good enough. I’ll take it. Especially, in this case, it is guaranteed.
Listen to Arkad. He just taught you compound interest again.
More lessons
Keep learning
Compound interest is awesome
Guard your money against fatal loss
Insurance is the foundation of your financial pyramid
Do not gamble with your money
Use thought out method to invest your money
Think about substantial belongings rather than fleeting things
7. Increase thy ability to earn: strive to become wiser and more knowledgeable.
I figured you are getting tired from reading by now, so I am adding an underline to the main points to spice things up.
Do not lend your money to people who cannot pay back
Also, do not borrow money foolishly
Arkad started this segment by talking about a young man who came to borrow money from him. When Arkad asked the reason for borrowing, the young man said it was to pay his bills. Arkad asked why is that, he replied that he does not earn enough to pay his expenses. Arkad replied bluntly. What you need is to increase your capacity to earn. The young lad was a very poor candidate to the banks and thus he refused to borrow him any money too. So there goes it, learn from the banks and Arkad. Do not lend to people just to pay bills as a general rule. Instead, help them find a way to improve their earnings.
Keep learning how to create passive income
Won’t it be awesome to sit back and make money without doing anything? I see you nodding yes to the question. The truth is that, to creative passive income, you have to put in some work up front.
Arkad said you must let the money you save work for you and then let the children of that money work for you also. So be strategic with this. There are many ways to make passive incomes. For doctors, I will recommend passive income MD. He has a phenomenal list of passive income ideas from easy to not so passive ideas.
The more we know, the more we may earn.
The person who seeks to know more of their craft is capable of earning more. Take the time to learn and become a master in your field. This does not mean you cannot start something that you are not knowledgeable about. However, if you are going to do this, make sure to learn about it thoroughly.
Crush the spirit of procrastination within you
You cannot arrive at the fullest measure of success until you crush the spirit of procrastination within you.
His analogy here is not to ever be late with your debt. In today’s analogy, many people pay interest on their credit cards mostly because they were not paying attention or procrastinating. When you get that bill, pay it immediately. Set up auto payments.
The same technique used in acing exams is the same to become wealthy. Do not procrastinate and increase your knowledge. Do not neglect the easy questions, in the finance world, do not forget to do the tidying up like paying bills on time.
Have a definite desire, not broad ones
You need a strong desire to earn more. Your desire has to be strong and definite. Don’t just wish, but desire to be rich. Arkad really believes it is all state of the mind whether you want to be wealthy or not. Arkad was able to become the best tablet scriber in the land. It is this same desire for success in his job that he continued to use to become wealthy. Do not stand still for wealth to find you, you have to hustle if you want it.
If your desire is too broad, then it defeats the purpose. I guess that’s the reason the specialist get paid more in general in most jobs.
Bonus- He discussed the power of luck
The summary is that luck only find the well prepared. To take advantage of luck, you have to be in a position to use it. The most hardworking, motivated and the non-procrastinators continue to be the ones that take advantage of opportunities.
Don’t just wait for luck, find it by increasing your knowledge and putting yourself in a position to become lucky.
Do not chase luck with gambling.
In Babylon, Arkad challenged people to mention someone they knew who became one of the wealthiest from winning lottery or gambling. This is a reminder that making money and becoming wealthy is 80% behavior.
Easy come easy go most times.
5 laws of Gold
Later in the book, Arkad son is now sharing the wisdom – I guess the inside wisdom from Arkad.
1) Gold comes easily and in increasing quantity to the person who saves at least 1/10th of their earnings.
2) Gold labors diligently and multiplies for the person who finds it profitable employment.
3) Gold clings to the protection of the person who invests their gold with wise people.
4) Gold slips away from the person who invests gold into purposes through which they are not familiar.
5) Gold flees the person who tries to force it into impossible earnings.
Everything else in the book is essentially a repetition of what has already been discussed.
If you want more, the 5 laws of gold were elaborated a bit in the article below
The simple dollar – 5 laws of gold
Recap
Step by step proven method to become filthy rich
1) Start thy purse to fattening: save money.
2) Control thy expenditures: don’t spend more than you need.
3) Make thy gold multiply: invest wisely.
4) Guard thy treasures from loss: avoid investments that sound too good to be true.
5) Make of thy dwelling a profitable investment: own your home.
6) Ensure a future income: protect yourself with insurance.
7) Improve thy ability to earn: strive to become wiser and more knowledgeable.
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I am a pulmonary and critical care doctor by day and personal finance blogger/debt slaying ninja by night.
After paying off close to $300,000 in student loan debt in less than 6 months into my real job, I started on a mission to help others achieve the same. There is no magic to this than to strap up and get it done. Some of the ways we achieved this include side hustle, budgeting, great negotiation skills, and geographical arbitrage.
When I was growing up, common knowledge in Nigeria is that there is one thing you cannot trust anyone else with, and you guessed it – your money.
Being frugal came easily to me based on my background. However, the concept of building wealth did not solidify in my mind until when I finished medical school. I wish I knew what I know now when I was 14. Still, I don’t know enough and I am constantly learning to improve my knowledge.
My goal is to reduce financial illiteracy among young professionals. I am catering to the beginners – babies and toddlers in financial literacy.
xrayvsn says
The Richest Man in Babylon is rightly classified as a classic with many parables that still work today in modern times.
Thanks for the detailed analysis of the book. It has been a year or so since I read it and reading this post almost felt like reading the book over again.
It is true that if you do automatic payments and have the money taken out before it hits your bank account you will not notice the impact to your lifestyle. We have a tendency to spend things when we see it in our checking account. By already paying yourself first you eliminate that option.
admin says
Thanks for stopping by xrayvsn – superman. Your Xray vision sees everything!! see what i did there? Yup it is good to always refresh the classics. I must confess, I tried reading it a while back, but failed miserably at completing it. Especially the second half. Eventually, I sucked it up and got an audio version. Listening to it did not hurt as much as reading. About the missed payments, it is a personal pet peeve of mine. I try to avoid unforced error as much as possible. Same way to pass exams. Get all the easy one right. Try your best with the hard ones, knowing that you may not master everything completely but that is ok.
Dale_TheMoneyGuy says
Great post. I think one of the great things about the principles in this book is that they will always be true. No matter how strange modern money management and currency gets, if you stick to these principles you’re unlikely to be left exposed when things go bad.
admin says
Agreed! Thanks for the compliment. The principle of money seems to be the same since the Neanderthals era. Ok except for burying their treasures. We make modifications here and there, but the principles are golden if taken the way it is.
Today I Quit My Job says
nice summary of the book. Life insurance is good but I hear of more and more people getting disability and employment? insurance too. Also many people ask if life insurance through your employer is enough.
I am a fan of investing my own money. I think for those who are inclined to research and want to learn about investing it can be fun. One piece of advice I liked about financial advisors (from the millionaire next door) is that if you hire one you should always ask to see what their personal returns were for the year. Not what the companies returns were. It was suggesting that you shouldn’t trust someone with your money who can’t manage their own on a personal level.
admin says
Thank for stopping by. I have edited it to just say insurance. You have a good point there. The book does mention to insure yourself against catastrophe. Disability insurance is probably even more important than life insurance. Life and disability insurance through your employer is not enough. The problem is that you can’t take it with you when you leave the job. With our generation not staying in one job for too long, it is even more important.
One of my favorite saying: “no once cares about your money more than you do” , having a financial advisor is just like an assistant. You alone is responsible for your due diligence. You are right, it helps if they already applied the right principle in their own lives. Whatever you do, don’t give a bricklayer your money to invest, unless you are trying to build a house.
ImmigrantFinances says
I loved reading this book. Thanks for the refresher. It was one of my favorite personal finance books because the rules were so simple, yet timeless. If anyone does all that is in this book, even if only saving the 10% advocated here, instead of >20%, they will still get wealthy. Another book that was so simple and closely resembles this one is “The Wealthy Barber”.
admin says
Thanks for stopping by as always ImmigrantFinances. I agree, it is a powerful book. I will look into the wealthy barber. I have heard about it but haven’t read it. I am already intrigued by the title.
Holly Bird says
Great post! Wish I would have followed this years ago
admin says
Thanks for stopping by. It is not too late to start. Everyone’s journey is different.
melaniethehomebody says
Sounds like an interesting read!
admin says
Thanks for stopping by and for subscribing.
Anshu says
I have this book and this Book is really awesome
admin says
Thanks for stopping by. It is a must read.
divvydad says
Great breakdown and recap of a classic book. It has been awhile since I last read this but it is great to see how these lessons are still so applicable today. Also, I am a big fan of reading as well and have been trying to get through a new book every 2-3 weeks or thereabouts. Just like saving, reading is a great habit that can pay dividends down the road.
admin says
Thanks for stopping by. The book is an inspiration. There are so much wisdom in the book, that I had trouble summarizing it. I am right about once a month right now in terms of real books. However, i learn a lot from blogs, forums, YouTube too.
Ruby's Books says
This sounds like an interesting book. I think these are principles everyone should follow, depending on their possibilities at any given time. Thanks for sharing 😀
admin says
Amen to that. Thanks for stopping by
admin says
Ageless book indeed. Thanks for stopping by.
Geraldine says
I need to learn more about investments. There’s so much and it gets confusing! I’m thinking of saving a couple thousands up and going to see a fiduciary to help me out!
🌺SincereMommy🌺 (@SincereMommy2) says
What a great story with a wise message. Love your posts! Thanks for sharing!
admin says
Thanks for commenting. It is an awesome book. Thanks for your kind words.
How to Become Rich says
Such a sound good Thanks for the informative information Keep it up more updating
I have bookmarked it
admin says
Thanks for stopping by. I am glad you find the information helpful
wealthydocmd says
Lots of great lessons here.
Leaders are readers for sure. Someone asked Warren Buffett how to get rich. He told them “be fearful when others are greedy and be greedy when others are fearful.” and read more. “I read over 500 pages a day.” “Few will follow my advice, but those who do will prosper.”
10% savings isn’t enough for doctors. Not with a late start, high debt, big spending, and no pension. Nope. But the concepts are great. At the end of one version they had an additional tablet that was “discovered” as I recall. I think it said something like save 10% but if you have debt also pay that down. You end up living on 70% or 80% of your income. That is a better version for doctors.