The Richest Man in Babylon

I have been hearing about the book “The Richest Man in Babylon” for a while and finally sought it out, in a used book store Jelly’s located in Aiea, HI  nonetheless. It is a quick read, more like a pamphlet than a book, and I’m glad I finally read it as it validated our financial habits…highly recommended for those just starting out and even for those who might be faced with a less than ideal financial situation.

The book itself, written by George S. Clason, focuses on practical actions you can take to build wealth and it was first published in 1926…before the Great Stock Market Crash of 1929 and the Great Depression that ensued. If you can get past the style of writing that is riddled with old English verbs and pronouns such as thy and doth, then I trust you would enjoy the book.

I especially liked the third chapter wherein the richest man in Babylon, named Arkad who was once a slave, at the behest of the King of Babylon, conducted what can only be termed as a conference attended by 100 citizens of varying backgrounds. The King wanted to address the growing chasm between the “haves” and “have nots” in Babylon and requested Arkad share his road to riches with citizens of Babylon. Arkad willingly honored the King’s request and convened the conference whereby he, over a week or so, shared his “Seven Cures for a Lean Purse”.

1. Start Your Purse to Fattening – Save at least 10% of what you make and learn to live with the remaining 90%…as there is a “strange truth discovered by Arkad that when he ceased to pay out more than 90% of his earnings, he manages to get along just as well” and “he keeps and spends not a certain part of all his earnings shall gold come more easily”

2. Control Your Expenditures – Live within your means and build and adhere to a budget…as “all men are burdened with more desires than they can gratify”

3. Make Your Gold Multiply – Once you’ve achieved to live with Rules 1 and 2, then you can focus on putting your money to work for you through “prudent” investments. Now the book wasn’t specific as to what types of investments vehicles one should explore but if you are interested in pursuing this, then suggest you read “Security Analysis” by Benjamin Graham or “Buffett, The Making of an American Capitalist” by Roger Lowenstein.

4. Guard Your Treasures From Loss – the book submits that the “first sound principle of investing is security of your principal”…something Graham would have said. Additionally, the book advises that one consults wise, experienced men when investing…now I don’t know if you readily believe this last part as it has been covered in financial publications that a good percentage of actively managed funds lag established market indexes. I for one am putting a majority of my investments in Vanguard index funds, namely VTSMX and VFINX.

5. Make Your Dwelling a Profitable Investment – the book proposes that one should own his/her own house and your house should be made a profitable investment. With the recent housing bubble and the relatively low valuation for houses, this might be a tough one to swallow. The book does submit, however, that many blessings come to that man who owns his house”…I can only wish that would come as tax breaks for homeowners.

6. Insure a future income – This is all about preparing for your retirement days when your “human capital” is not as robust as your prime earning years…this is about having a viable retirement plan (401Ks, IRAs, etc.) to take care of you and your family’s needs in your advanced age, which is especially critical during these days when one can not readily count on pensions as the previous generations have.

7. Increase Your Ability to Learn – This is all about cultivating your “human capital” and learn as much as you can about your chosen craft, be marketable.

The book also provides a cautionary tale about loaning your hard earned money, relating a story about a farmer from Nineveh, who can understand animals, with his ox and ass. One day the ox was complaining to the ass that “he labored plowing the fields day and night while the ass only works when the farmer wants to go somewhere”. The ass tried to help whereby he advised the ox that he may have a day of rest by pretending to be sick. So the following day, with the ox “being sick and unable to do the day’s plowing”, the farmer had the ass hitched to the plow and proceeded to plow all day long. The moral of the story is “if you desire to help your friend, do so in a way so as not to put your friend’s burden upon yourself”.

All in all a very good book and I am glad I finally got to read it.

About vanguard23

I am a retired U.S. Army officer married to another retired U.S. Army officer...and combined, we are a FIREd (Financially Independent and Retired Early) couple who loves to travel and discuss our adventures...and occasionally dabble in Financial Management.

Posted on March 6, 2011, in Finance and tagged , . Bookmark the permalink. 3 Comments.

  1. Michelle Ohira

    Hi Kuya,

    Thanks for the Cliffs Notes version of this book. Rule #5 is not always in your control though, so I’m not sure how I feel about that. I agree with most of them, except for #5 and #2. Live within your means…..who defines what your “means” are? Mine and Tomo’s measurement of our means might be quite different. Overall, pretty helpful.


    • Mitch,
      Rule number 2 is crucial to the plan…but is dependent on Number 1. If you adhere to Number 1, then you would have no choice but to make Number 2 work. I believe the book suggests that to live within your means is to live within that 90% of your earnings and nothing more. Actually, as we discussed, if you are in debt, you should live with 70% or your earnings as one should use 20%, on top of the 10% saved, to pay off ones debts.
      With regards to number 5, that might be a bit archaic but not devoid of merit.

  1. Pingback: Financial Advice That Fits on a 3×5 Card | Van-Guard's Random Thoughts

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: