The Richest Man in Babylon is a collection of parables set in ancient Babylon that conveys financial lessons through the fabled experiences of the richest man in the richest city in the world. After circulating for several years as a series of pamphlets, the book was published in 1926, but it’s lessons are just as applicable today.
Each page contains great insights, but the central theme of the book can be summarized by the following paragraph:
“A part of all you earn is yours to keep. It should be not less than a tenth no matter how little you earn. It can be as much more as you can afford. Pay yourself first. Do not buy from the clothes-maker and the sandal-maker more than you can pay out of the rest and still have enough for food and charity and penance to the gods.”
Just that first, short sentence creates a huge mental shift. The phrase “yours to keep” allows you to think of saving as a reward for earning instead of a prohibition against spending. You may enjoy buying “stuff,” but every hard-earned dollar you spend is one that you cannot keep. So instead of building your own wealth, it’s building the wealth of someone else.
Next, we learn a minimum threshold for saving—at least 10% of everything you earn; although, more is encouraged. If you currently save nothing, 10% may seem like a lot, but it’s really not. Another part of the book discusses how it’s human nature to find a “need” for every dollar, but often, those needs are really just wants.
So if you “pay yourself first” by putting aside your 10% in savings, you eliminate the decision to spend that money elsewhere. Saving becomes automatic, and you can more clearly identify what your actual needs may be. The temptation to buy “stuff” (or clothes and sandals as he mentions) diminishes and your savings start to grow.
The characters in this book may not be real, but they lessons they convey truly are.
Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at.