Timeless Money Creating Principles from The Richest Man in Babylon
- Personal Finance
- Money Management
- Conservative Value Investment
Generally I like to read and review the most recent books, but from time to time I am lured into a true classic. My guess is that many of us on our path to success have already stumbled upon this one and that’s just why I’ve reviewed it. If you’ve read it in the past, it’s worth another glance. Its lessons are more relevant than ever as many of those around us face difficult economic times. Perhaps our country wouldn’t be where it is today if we had all heeded the lessons of fundamental personal finance and investment that George Clason laid out for us almost 100 years ago.
Clason takes a creative, yet simple story-telling approach to teach the reader the basics and the foundation of how to conservatively build wealth over time and become financially successful. The story takes place in Babylon some 6,000 years ago where the significance of financial wealth, gold in this case, was as important as ever. As much as I hate to admit it, we live in a society that only seems to put more and more importance on money. I hope and trust that you readers are driven and motivated by your own definitions of success, but our culture as a whole still has a long way to go.
In Babylon there is a man who is wealthier than all and there is another poor man deeply interested in how he has achieved such status so he begins to make daily visits to his house on the hill, bringing others along, to learn the lessons that created such wealth. The man is open to share his keys to success and the others intently listens as he tells stories and experiences in his life that get across the most fundamental techniques of personal money management, savings and investment.
At times I found myself so deep into the stories being told that I had to step back to realize the significance of the seemingly simple lessons. To be honest, most of us have surely heard these in one form or another but most likely not in the form of such an engaging playbook.
Some of the core lessons include:
- Part of what you earn is yours to keep–Save 10%
- Control thy expenses
- Don’t borrow unwisely or unnecessarily
- Make gold multiply–invest wisely and prudently
- Guard against loss–invest with a margin of safety
- Understand where you invest
At first glace it’s easy to discredit these as simple common sense. But the thing we should all be aware of at this point is that common sense is not common practice. As I reread through some of these key points, I realized that they have so much in common with many of the wealthy men of our time. Take Charlie Munger (who’s recommendation first turned me onto this book), Benjamin Graham or Warren Buffett. These guys have followed these points closer than you’d think possible and they are known to be the best investors of all time, not to mention quite wealthy. I have been reading Warren Buffett’s biography, Snowball (which you’ll see a review on shortly) and it has reaffirmed how incredibly fanatic Warren has been from day one to do everything mentioned above. He has been saving money since he could walk and to this day he controls expenses more stringently than even the great majority of the middle class, yet he is worth some $60 billion. And we should all know that he’s followed the last three. That’s what keeps him from investing in so many of the things that lead to ruin. And his mentor, Ben Graham, made famous the idea of guarding against loss in his concept of a margin of safety. He wouldn’t touch an investment unless it possessed something that insured against the downside–which often meant investing in a company with a strong balance sheet and a ton of cash.
My point in mentioning these guys is that they are famous for their wealth creation and while George Clason and the richest man in Babylon (if he really did exist), are not quite as well known, their lessons teach us the things that will all but guarantee the strict follower to become far wealthier than necessary. Proof is riddled throughout history. But yet what continues to blow my mind is that despite this historical evidence, most everyone around us is still over-spending and in up to their ears in debt. Even those who make half a million or a million a year still manage to let their expenses run wild and don’t possess the discipline to save. Granted everyone else around them is in the same rat race–Make money so you can spend more money so you need to make more money; all so you can look good to others. The truth is that the answer is simpler than any of us would like to imagine but it takes more discipline than most anyone wants to put forth.
As these lessons become more and more relevant, the discipline required to really execute on them only gets larger. Our culture seems to be convinced that spending and material accumulation is the way to success. It’s true that it may be the way to outward and superficial success, but that won’t take you much farther than a couple compliments at your first few cocktail parties. Sooner rather than later it will catch up to you, as it has done to our country as a whole. And at that point it will become necessary to dust off your ‘internal yardstick’ and start measuring yourself, your actions and your success by what you know to be proven and true. This goes for your financial success as well as success in every other part of your life. Measuring yourself against the superficial standards of others and society will only lead to disappointment and further you from your own fulfillment.
Take this read not only as a chance to relearn the simplicity and discipline that goes into financial success but also as a reminder that the road to success of all sorts is often not lined with a bunch of spectators following the crowd. If you have your own conviction and discipline of what creates results, that crowd will be anything but necessary as your travel down your own road to achievement. The wealth–be it gold, happiness or anything in between, will certainly follow.
-Reading for Your Success
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“Wealth that comes quickly goeth the same way.”
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“Better a little caution than a great regret”
“Where the determination is, the why can be found”