George S. Clason. The Richest Man in Babylon. Penguin Books, New York © 1955, .., 1926.
In 1926, author George S. Clason published a famous series of pamphlets on thrift and financial success that were distributed by financial institutions to millions of readers. His book is a collection of inspiring parables about personal finance. It’s a book of “cures for lean purses”. Here’s a revised summary.
Laws of building wealth
Arkad was a wealthy, generous merchant, but his friends in youth either failed to learn the laws of building wealth or didn’t observe those laws. Arkad cautioned Bansir, the craftsman, that people who inherit wealth tend to spend it away or live the miserable life of a miser. For those without an inheritance, acquiring wealth requires time and study.
- Save 10% of earnings to create an estate
- Put the savings to work by investing in good opportunities
- Seek good advice for investing
- Losses and gains depend on the skill and experience of the investor
- Avoid schemes to earn wealth quickly
People who wait are less fortunate. Begin investing at a young age. When Basir asked Arkad’s advice on starting late in life, Arkad repeated the same rules, emphasizing to invest savings with greatest caution not to lose any returns.
Ancient Babylon sat on arid desert next to the Euphrates River. All of Babylon’s wealth was man-made in this harsh environment. Work was not reserved for slaves, it was also the friend of freemen. There was a time when very few rich citizens acquired most of the gold while the rest of the population lived in poverty. The King desired that all men should know how to acquire wealth so he consulted Arkad, the richest man in Babylon. Arkad agreed to train teachersabout the 7 cures for an empty purse:
- Save 10% of your income
- Avoid needless expenses for luxuries. Budget for necessary expenses.
- Multiply your savings with compounded returns
- Invest wisely, where the principal is safe. Don’t make risky investments.
- Own your house
- Insure a treasure for retirement and protect your family.
- Cultivate skill and wisdom. Pay your debts and prepare a will.
Only lend money to people with good credit. They will use the loan wisely and repay the loan. The safest loans are to those who can fully repay by selling property or who have an assured income. Borrowers who have no property or income need a friend to guarantee repayment. Hopeless debt is a pit of sorrow. Is the borrower credit worthy? How will he use the loan? Does he understand the business? Does he have a plan?
Young Takard was destitute, hungry, and in debt. One of his lenders, a wise camel trader named Dabasir, confronted Takard with an allegory: Dabasir was once indebted to many lenders until he determined to repay with income earned by hard, honest work. Moral: repaying a loan requires determination.
Dabasir’s plan to repay debt was to allocate earnings in this way:
- 10% into savings account
- 70% to support the household
- 20% to repay lenders
Protection of wealth
Ancient Babylonians used a small army to defend against the mighty army of Assyria. The strong walls of Babylon protected the citizens and their treasures. Today, we can’t afford to be exposed by inadequate protection. The impregnable walls that protect our treasures from unexpected loss are:
- Savings accounts
- Dependable investments