“When youth comes to age for advice he receives the wisdom of years.”
Although a fictional account, The Richest Man in Babylon uses a series of parables set in ancient Babylon to illustrate financial principles that I believe provide a foundation for any person wanting to control their finances and become wealthy.
His principles for avoiding a lean wallet include:
- Save 10% of your income
- Control your expenditures: Enjoy life while you are here. Do not overstrain or try to save too much. If one-tenth of all you earn is as much as you can comfortably keep, be content to keep this portion. Live otherwise according to your income and don't be stingy and afraid to spend. Life is good and life is rich with things worthwhile and things to enjoy.
- Make your money earn money
- Don’t enter an investment where you can lose your principal. Seek the advice of people experienced in creating wealth. Better a little caution, than great regret.
- Own your own home
- Provide in advance for the needs of your growing age and the needs of your family
- Cultivate yourself to become more knowledgable. Act in a way that you can respect yourself.
A gifted storyteller, George Clason exposits the value of good character within his stories. For example, he talks about the value of hard work and relates how sincere, hard work creates opportunities out of bleak situations. I think applying oneself may increase interactions with others and generate ideas for remedying one’s situation however his emphasis on values seems a little outdated specifically in light of the current recession, housing doldroms, European debt crisis, and stubborn unemployment facing our nation. The shadow of a nation’s or region’s fiscal policy looms over many of the decisions that individuals can make. Clason claims that a population of fiscally minded individuals can generate incredible wealth for a nation such as Babylon, however I find his optimism too simplistic and unrealistic in accounting for the general lack of discipline or awareness in basic principles such as minimizing consumer debt, saving, and investing for retirement. In summary, I find the characters in his stories and the parables he uses interesting and valuable but insufficient to inspire confidence in today’s economic condition.
1. Analyze your cash flow for the past 60 days. What are some areas of unexpected spending?
2. If you haven’t automated saving into your personal checking or savings account, start this week. Even if you can only begin at 1%, gradually increase that rate until you become comfortable with living on and being happier with less disposable income.