Wouldn’t it be nice if personal finance and money management were mandatorily taught in high schools? The lack of basic financial education leaves many young adults ignorant of how to spend money wisely, cultivate healthy saving habits, and stay out of debts.
Smart work can make one earn a six-figure salary but without proper saving and investment knowledge, the money can be lost in the twinkling of an eye.
To learn how to save more, invest in the right business, and manage personal finances, we take a look at the book, ‘The Richest Man in Babylon’ and pick out timeless lessons on how to acquire wealth and spend money wisely.
Though one may wonder how a classic book, published in 1926 by George S. Clason can possibly be helpful in this modern age, the 144-page book is packed with lessons on wealth-building habits and financial stability.
Set in the ancient city of Babylon, the book is broken into a series of short parables following characters who are learning on the journey to acquire more gold. The story started with Bansir, a chariot builder and Kobbi, a musician. Although the two friends had become the best at their craft, they had no money.
Bansir and Kobbi then sought the advice of their childhood friend Arkad, who, in contrast, had become very rich and amassed a lot of wealth. The lessons Arkad shared with them formed the premise of the book.
Clason shared seven cures for a lean purse, which we discuss here, and the five laws of gold.
Start thy purse to fattening
“‘A part of all I earn is mine to keep.’ Say it in the morning when you first arise. Say it at noon. Say it at night. Say it each hour of every day. Say it to yourself until the words stand out like letters of fire across the sky.”
Have you ever noticed that before you receive your monthly salary, the government taxes your income? They pay themselves first with your money before you get paid. The reason is not far-fetched, it is because they understand this rule of wealth.
When you eventually get paid, rather than pay yourself first, you pay for an online course, fabric, the shoes and/or bag you’ve had your eye on for a while. Clason says that you slave for other people when you pay them first after you get your salary.
He recommends saving at least 10% of all income earned first. In his words, “It should be not less than a tenth no matter how little you earn. It can be as much as you can afford.”
If you want to save money for your future, you must start by consistently putting aside part of your income and your future will thank you for that. To even make it easier, you can set up an account on any of the fintech platforms available to automatically deduct this amount from your account at the end of every month.
Control thy expenditures
“Confuse not the necessary expenses with thy desires. Each of you, together with your good families, have more desires than your earnings can gratify.”
Many times when the money you’ve worked for hits your bank account, you forget how tiring it was to wake up early to beat the almost inevitable traffic, brainstorm, and sometimes still not get the desired results.
The first thing that often comes to mind is how to splurge or pamper yourself, which really isn’t bad; the problem is spending more than you earn.
The book says it is better to live below your means. It also advised that if perhaps you get a raise, it is best to maintain your current expense level as if the raise never happened.
In the words of Clason, “Budget thy expenses that thou mayest have coins to pay for thy necessities, to pay for thy enjoyments, and to gratify thy worthwhile desires without spending more than nine-tenths of thy earnings.”
Make thy gold multiply
“A man’s wealth is not in the coins he carries in his purse; it is the income he buildeth, the golden stream that continually floweth into his purse and keepeth it always bulging.”
A number of people have healthy saving habits but the money just sits pretty in their accounts without accumulating any interest; the bank then deducts monthly card maintenance fees and other unseen charges.
One of the lessons from the book is that you should put your money to work by making smart investments. Nevertheless, this should come after you have enough in savings and you’ve also prepared an emergency fund for unforeseen circumstances.
Arkad explained to his friends how he invested in the right business after his first investment failed. The business did not only increase his capital but also his earnings. He said he ensured that his earnings became golden slaves for him so that as they laboured, their children and children’s children also worked till the income became great.
Guard thy treasures against loss
“Misfortune loves a shining mark. Gold in a man’s purse must be guarded with firmness, else it be lost.”
Nobody ever expects things to go wrong for them but it happens anyway and most times, there is little or nothing to be done. In Nigeria, insurance is something people seldom talk about. If one talks about it, it is believed that the person is expecting something bad to happen.
However, the whole idea of insuring lives and property is to be protected financially in case anything bad happens.
So, to avoid the loss of treasures gathered over time, it is advised that when investing in a business, especially one that is not your area of specialisation, you should be careful before parting with your treasure. And it is better to seek the advice of those experienced in such fields.
Make of thy dwelling a profitable investment
“No man’s family can fully enjoy life unless they do have a plot of ground wherein children can play in the clean earth and where the wife may raise not only blossoms but good rich herbs to feed her family.”
So many people in urban cities around the country live in rented apartments, probably as a result of proximity to their workplaces, convenience, and other considerations they deem important enough.
The book recommends that one should own their own home rather than renting because the money can be invested in the home or invested in other things instead of investing in someone else’s business that won’t yield profit.
Insure a future income
“Provide in advance for the needs of thy growing age and protection of thy family.”
Imagine you are a 20-year-old and you start saving 20% of your ₦1, 000, 000 annual income. At the end of each year, you would have saved ₦200,000.00 for your future.
If you retire at the age of 65, you’d have saved an estimated total of ₦9,000,000 and this doesn’t include the annual raise that may occur within the period of time and the interest it would have accrued. This only goes to show that the earlier you start saving for the future, the better the retirement.
Clason says that you should invest for retirement and your family’s well being after passing on. He advises that everyone, “should plan certain investments or provisions that may endure safely for many years/yet will be available when the time arrives which he has so wisely anticipated.”
Increase thy ability to earn
“Cultivate thy own powers, to study and become wiser, to become more skilful, to act as to respect thyself.”
No one wants to pay or employ someone who doesn’t add value yet wants to get enormously paid at the end of each month.
The best way we increase our income is by investing in ourselves. This can only be achieved by continually learning and growing.
We are in the Information Age where at the tap of a button, the Internet gives us access to everything we want to learn.
There are many things we can learn by ourselves as we seek to be well-rounded. In Clason’s words, “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.”
The other part of the book discusses the five laws of gold and there are many lessons to be learnt from them. The book is highly recommended for anyone wishing to learn or understand wealth creation and investment.
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