avatarNiru

Summary

The article discusses the application of financial lessons from "The Richest Man in Babylon" to modern personal finance management, emphasizing saving, budgeting, investing, and upskilling.

Abstract

The author reflects on the enduring relevance of "The Richest Man in Babylon" and outlines seven key financial principles that have been personally impactful. These include saving at least a tenth of income, creating and adhering to a budget, making money grow through investment, ensuring financial safety, owning a home, investing for the future, and continuous self-improvement through upskilling. The author shares personal experiences with each principle, highlighting the importance of financial mindfulness, the power of compounding, and the value of seeking expert advice. The article serves as a practical guide for individuals looking to improve their financial situation by adopting timeless wisdom in a contemporary context.

Opinions

  • The author advocates for the "Earn, Save, Spend" philosophy, suggesting that saving should occur immediately after earning, followed by spending the remainder to avoid debt.
  • Budgeting is seen as an eye-opening and initially challenging practice that leads to more mindful spending and prioritizing worthwhile expenses over casual wishes.
  • The author acknowledges the difficulty in understanding various investment options but stresses the importance of starting early to benefit from compounding interest.
  • While agreeing with most principles, the author questions the advice to own a home, considering the challenges faced by those with young families or who move frequently.
  • Financial safety is emphasized, with the recommendation to seek guidance from wealth advisors to protect the principal amount while allowing for diversification and fluidity.
  • Investing for the future is encouraged, with the belief that consistent learning and application can lead to significant personal and financial growth.
  • Upskilling is viewed as a critical investment for adapting to future job markets and ensuring the ability to learn and apply new knowledge quickly.

Lessons from The Richest Man in Babylon

Practical applications in this Average Jane’s life

Ever since I read The Richest Man in Babylon- I have been blown away by how amazing and how relevant this book is even after all those year of first being published.

Here are the chief take aways and my own experience.

1. Earn, Save , Spend

Now the first rule says to save at least a tenth of your income. But I like to use the simple phrase that my accountant dad likes to advocate.

Earn first, save immediately and then spend what is left. You’ll never get into debt or even if you do take a loan, (because hello paltry savings percent) — never more than you can repay.

If you can automate, even better. Simply ensure that a portion of your income goes straight to savings and you’re all set. Because, surprise, surprise — most banks have a limit on monthly transfers from savings to checking account. Use this rule to prevent yourself from dipping into your own hard earned money.

2. Budget

This is tough. Not because we lack the time or skill to budget. But because we learn truly what what we spend on. It’s an eye opener and annoying at first. But think of it as an experiment. And then analyze at the end of the fortnight or month . It’s amazing how much comes to light.

The habit won’t necessarily curb your spending but you will start being a tad bit more mindful. I personally find that being a bit more careful of one item at a time world better than a complete thrift mindset. Say, being mindful of entertainment expenses at first and staying within limit; then following up with restaurants/ take out and so on.

Like in the book, it’s important to ensure that we have ample for necessities and then to fulfill worthy desires not casual wishes. All while also saving a tenth or more. For instance, our restaurant expenses — we minimized but did not eliminate because it gave us a respite from daily cooking and cleaning and acted as a family fun and highly anticipated activity and a way for us to get ideas to recreate similar dishes in our own kitchen and potlucks. (Because yay for a foodie family) Of course, this is all pre-COVID and baby#2 , but the point is the same- think value and worth.

3. Grow

Make your money grow — plow back what you are earn and save so it grows.

This is a bit hard for us trying to understand the various instruments, risk all the while balancing the need for fluidity given that we have a young family.

But we have learnt that starting early helps and tapping into the power of compounding works wonders.

4. Keep it safe.

Guard your money such that the principal is always safe and can be reclaimed. Seek the wisdom of those who know to handle money expertly.

As mentioned in the previous point, we’re learning constantly and only getting into spaces where at least the principal is secure. Given our family dynamics, fluidity and diversification are even more important so we definitely use our trusted wealth advisors to grow our little eggs and teach us too!

5. Own your home.

We don’t unfortunately. And this is probably the one point I disagree with slightly. Paying for a home is probably not the best choice for those who move constantly and have a young family. And if you live abroad, it becomes harder and more complex.

Nevertheless, I think saving for a home is definitely is a great alternative in such cases.

6. Invest

Invest for future, retirement, aging needs and for dependents.

Learn about the different instruments available and the different options. Even if you are a complete novice with personal finance, a little determination and few minutes everyday over time will reap benefits like it does for me.

Decide on your goals and outline your responsibilities. Unless you know your final objectives, you can’t progress towards it or not even know if you are on the right track or not.

7. Upskill

Cultivate your own powers, study and become wise, become more skillful and more confident to achieve more of your own desires.

Basically, cultivate the habit of continuous learning. Upskill yourself. Teach the kids about money and about how to learn. The jobs of future for us and for our next generation don’t even exist today. So, the ability to quickly learn and apply is the best investment of all. Do it.

And thus, you have it- George Clason’s seven rules of riches as applied and experienced by an average Jane. Which one is your favorite?

Also, if you like this story- here is another book review:

Personal Finance
Books
Lessons Learned
Money Management
Reading
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