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If you have time to read just one book about personal finance and use only the advice in that book, I recommend you read “The Richest Man in Babylon” by George S. Clason. Though it was first published nearly a century ago in 1926, its timeless wisdom still makes it a must-read on money and wealth.
Why read “The Richest Man in Babylon,” you ask? The book has it all: building better money habits, saving, budgeting, investing wisely, managing debt, planning for retirement, understanding compound interest, and even the value of patience and hard work. All of this is taught through relatable parables – short stories set in ancient Babylon – that make the lessons both enjoyable and memorable. It reads like a Scheherazade story, you just can’t wait to find out what comes next.
My favorite part? The chapter “Seven Cures for a Lean Purse.” It lays out seven simple steps to building wealth. That’s all – just seven steps. You don’t need to read or do anything else if you don’t want to. Just follow these seven steps, and you’re on your way to financial success.
Seven Cures for a Lean Purse
Here is a clear, actionable roadmap for financial health. Let’s explore in more depth what these 7 steps require you to do:
1. Start thy purse to fattening
“For each ten coins I put in [my purse], to spend but nine.”
Meaning: Save at least 10% of your income. It can be more if you can afford it, but don’t let it be less than 10%. Cover the rest of your spending with the remaining 90%. Over time, this habit builds a safety cushion to be used for emergencies, paying off debt, or investments.
2. Control thy expenditures
Live below your means. Budget wisely. Track your daily spending. Don’t let lifestyle inflation get the best of you. Make sure you know what your “needs” and “wants” are. It’s all about balance: it’s ok to buy yourself something nice every once in a while and enjoy life, but be sure to keep to your budget and your good financial habits.
3. Make thy gold multiply
Saving is the first step to becoming wealthy. Making your money work for you is where the true wealth-building magic happens. Just be sure the investment you choose is a profitable and safe one. Once you find such an investment, also reinvest the returns for the power of compound interest to work.
4. Guard thy treasures from loss
“The first sound principle of investment is security for thy principal.”
Building on from the previous step, make sure that any investment you enter into won’t make you lose money, and will allow you to exit the investment quickly and safely. Protect your money. You don’t want your hard-earned savings to go to waste. If an investment sounds too good to be true, it most likely is.
The book stresses that you invest only if:
- The principal remains safe.
- You can exit the investment safely at any time.
- You will receive predictable and reasonable returns.
In practice, it all comes down to your risk tolerance, but it’s still sound advice. Don’t trust silver-tongued salespeople. Do your own research.
5. Make of thy dwelling a profitable investment
The book encourages you to own your own home as a means of financial stability and wealth-building.
I don’t disagree with that. However, I’m biased when it comes to this step as I think there is much to consider when choosing to buy a house or to rent. Both of these have advantages and disadvantages, that’s why I believe you need to rationally weigh pros against cons, and make a decision based on that. The key word here is “profitable”. Whatever choice you make, ensure it aligns with your financial goals.
6. Insure a future income
This step stresses the importance of preparing for retirement as well as in case of your death so that your loved ones are taken care of. It’s hard to think about it now as it seems so far away in the future, and the thought of death is such an unpleasant one, but it is important to prepare for it. If it helps, imagine how you’d like to be cared for if the roles were reversed, and then plan and act accordingly.
7. Increase thy ability to earn
Last but not least is the step “to cultivate thy own powers, to study and become wiser, to become more skillful” and thanks to that – earn more. When setting earning goals for yourself, be sure to make them achievable and tangible – “5 pieces of gold” are a better goal than “earn more”. You can clearly see when you’ve earned the “5 pieces of gold”, and you can analyze what you did to earn it, how well it worked, how long it took to earn, etc. Make sure to start small so as not to overwhelm yourself.
“The Richest Man in Babylon” Quotes – My Favorite Quotes From the Book
- “Pay yourself first.”
- “A part of all you earn is yours to keep. It should be not less than a tenth no matter how little you earn.”
- “Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade.”
- “Advice is one thing that is freely given away, but watch that you take only what is worth having.”
- “I again saved each tenth copper, for I now had formed the habit and it was no longer difficult.”
- “Confuse not the necessary expenses with thy desires.”
- “The penalty of risk is probable loss.”
- “Desires must be simple and definite. They defeat their own purpose should they be too many, too confusing, or beyond a man’s training to accomplish.”
- “This is the process by which wealth is accumulated: first in small sums, then in larger ones as a man learns and becomes more capable.”
- “The more of wisdom we know, the more we may earn. That man who seeks to learn more of his craft shall be richly rewarded.”
- “Opportunity is a haughty goddess who wastes no time with those who are unprepared.”
- “When I set a task for myself, I complete it.”
Action Plan: Lessons From “The Richest Man in Babylon” in Action
When I read a book or listen to a podcast, I like to make an action plan. It allows me to implement what I’ve learned.
After all, as Jim Kwik said in the video “3 Simple Hacks To Remember Everything You Read | Jim Kwik”, if you don’t use what you read, “all you did was invest time and you’re no better off than someone who’s illiterate.”
Here are some actions my family and I plan to implement:
- Make saving a habit: Turn saving into a family game for a month to build the habit.
- Needs vs. Wants: Create a family budget and a list of Needs vs. Wants, and stick to them.
- Research investments thoroughly: Understand industries and companies before investing, and have an exit strategy in place for each investment.
- Learn and prepare for opportunities: Read “Valuation: Measuring and Managing the Value of Companies” by McKinsey & Company and find possible stocks worth investing in.
- Finish what I start: Focus on completing one task daily, no matter how small, to build confidence and discipline.
- Prepare a will: Ensure our family’s wealth is distributed according to our wishes. Find out what is necessary to make a will legal, and consult with an attorney if necessary.
The reason the lessons from “The Richest Man in Babylon” are still relevant today, even after nearly 100 years, is that they’re simple, actionable, and timeless. They aren’t about quick fixes or overnight success – they’re about building good habits that lead to long-term financial stability. They have stood the test of time, proving that financial wisdom is universal.
Why not start small? Pick just one of the Seven Cures to work on this week – saving 10% of your income, tracking your expenses, or exploring investment options – and see how it shifts your perspective on money.
Remember, the journey to financial health doesn’t have to be complicated. Small, steady steps add up. As the book says, “Wealth, like a tree, grows from a tiny seed.” So why not plant that seed today?
Have you read “The Richest Man in Babylon”? I’d love to hear what you think about it and any insights you’ve taken away. Let’s chat in the comments below.
Disclaimer: I am not a financial advisor, and the content on this blog is for informational purposes only. Investing carries risk, so it’s important to do your own research before making any financial decisions. The information shared on this blog is not intended to be financial advice or a suggestion to invest in any particular asset or strategy. For personalized advice, please speak with a licensed financial professional who can assess your unique situation and goals. Ultimately, all investment decisions are your responsibility.
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