If You Want To Read Only One Book On Money, Read This Book

These are the golden rules of financial freedom

There is a reason why The Richest Man in Babylon is considered one of the best books on building and accumulating wealth. I read this book last year and applied the principles of the book. I can say that I have seen some great results. I was not only able to save money but also make money work for me.

I came across this book when I was looking to learn about money. Since we are not taught these topics in schools and universities, most people struggle with money because they don’t know how money works.

I was watching some YouTube videos and reading some articles about money but could not find anything substantial. That’s when I came across this book and it has changed my views about money. Now, I at least know how to save money and invest it.

These are the 7 principles I learned from this book:

1. Save at least 10% of your income every month

The golden rule about money:

“You have to pay yourself first before you pay to anyone.”

Pay 10% of your income to yourself. 10% might not seem much to you but over the long run, it could save you tons of money. For example, If you are making $4000 a month, you can save at least $4800 in one year. And, that’s the minimum I am talking about. With time you will notice an increase in your wealth.

I started doing that two years ago. Since I am a graduate student, I get paid only $2000 a month. However, with this golden rule, I have been able to save close to $15000 in the last 3 and half years. That’s pretty amazing, right. If I can save money, you can do it as well.

2. Control your expenditures

You don’t need too many things in life to live a comfortable life. You don’t need two couches. You don’t need 5 pairs of shoes. You don’t need to buy the latest i-phones.

“Don’t confuse your necessities with desire”

Try not to spend more than 70% of your income. I keep my expenses in control. You can do it by tracking down your expenses using excel and figuring out where you are wasting your money.

Here are the things I do to control my expenses:

1. I cook almost every day and I avoid eating out more than 4 times a month.
2. I avoid consuming alcohol so I don’t spend any money on alcohol.
3. I don’t spend money on buying expensive mobiles and clothes.
4. I don’t buy coffee every day. Making coffee for yourself can save you at least $70–100 every month.

3. Invest your savings

It’s not enough to save your money and keep it in the bank. Money in the bank is doing nothing for you. You have to make your money work for you. How do you do that? You do it by investing money.

I like the way the author describes it in the book

“These investments are the seeds of your golden plant. Your savings should work for you and don’t eat its children. Make its children work for you as well. This will generate a stream of wealth into your treasure. When you have an army of a golden slave, then you can start enjoying the luxuries.”

I invest my money mainly in stocks. So far, I have been able to make a 20% return on my investments. That’s good because the bank does not pay you any interest.

4. Don’t invest in the fields that you don’t understand

That’s a great point the author makes in the book. Not any investment, but the wise investment is necessary to grow your money. You do that by investing in the fields you understand.

I invest my money in large companies like Facebook, Amazon, Microsoft, Apple, AMD, NVIDIA, etc. I don’t buy shares of small companies because I don’t understand them. I don’t buy cryptocurrencies because I don’t understand them.

If you want a safer option, then you can invest in index funds. They give you one average 10% return yearly.

5. Own a house

Everybody needs a place to live. The place they can call homes and feel safe and protected. That’s only possible if you buy a house.

I know, it’s easier said than done. Houses are so expensive nowadays but you can buy it if you save money and invest it wisely.

I am too far away from my goal but I will have my own house one day. Owning a house saves rent which can be invested to make more money.

6. Ensure a future income

As the author says:

“Make sure you have some kind of investment that will ensure that you don’t have to worry about money when your retire.”

Here are a couple of things you can do:

1. Make sure you save enough money so that you can easily live on the interest you will earn on that money.
2. Buy a small property and rent it. You can earn enough through the rent to pay your monthly expenses.

7. Increase your ability to earn

Always look for ways to earn you money. Here are a couple of things you should do:

1. You should adopt the mindset of learning new things and developing your crafts. This will increase your chances of earning more money.
2. Become more skillful at your work and you will see tremendous growth.
3. Start a side hustle. Don’t waste your free time. Use it to build a side hustle. Choose a side hustle you are passionate about.

I hope I have convinced you to read the book. Give it a try, it’s a great book.