★ Rockstar Book Review: “The Richest Man in Babylon”
This is part of our Rockstar Book Review series.
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“The Richest Man in Babylon” – Ten Tales Worth Reading and Sharing
Clason’s work is a true gift to the world. His parables entertain and educate in the areas of personal finance and living the good life, namely in the areas of saving, avoiding debt, investing, continuous learning, and the monetary and non-monetary value of hard work.
Theme #1: Saving
The book teaches the value of saving 10% of earnings for the long-term, to be used to invest, insure the household against loss and to provide a cushion against hard times. Many stories include warnings against the ramifications associated with a lack of savings, and how it can affect both a person’s potential for success and their general disposition.
Theme #2: Avoiding Debt
All Clason’s stories caution against the use of debt, other than when this debt is used as part of a deliberate plan in an area where the borrower has some expertise. Clason’s characters are often shown as slaves to debt that resulted from poor choices such as consumerism, speculation or poor investment decisions.
If thou contentedly let the years slip by and make no effort to repay, then thou has but the contemptible soul of a slave. No man is otherwise who cannot respect himself and no man can respect himself who does not repay honest debts. (pg. 133)
In situations where debt is to be repaid, Clason suggests that 70% of money earned should go to living expenses, 20% to debt repayment and 10% to savings & investing.
One noted exception regarding debt is the author’s belief that home ownership is an acceptable type of personal debt, as long as this debt is repaid within a few years’ time.
Theme #3: Investing
The author cautions the lenders (investors) to choose investments that are lower risk in order to protect their hard-earned principal. Clason stipulates via his characters that the investments should not be speculative and should provide a fair return for investing in solid businesses and people who have a proven track record of paying back what is owed. Further, he addresses the need to seek collateral of various types when lending money for a venture or for personal use.
Finally, he cautions that under no circumstances should a lending situation result in the lender bearing the burden of a debt to a friend or to family—an unfortunate, yet common, pitfall.
Clason also makes a point of highlighting that procrastination can have a significant impact on our ability to accumulate personal wealth through compounding interest.
The spirit of procrastination is within all men. We desire riches; yet, that spirit of procrastination from within doth urge various delays in our acceptance. In listening to it we do become our own worst enemy. (pg. 74)
Theme#4: Continuous Learning
What’s worth more than money according to Clason? Wisdom. This book is full of references to the importance of:
- understanding and applying good money management principles
- learning from our mistakes to ensure we don’t repeat them
- studying potential investment opportunities to ensure they’re the right fit
- mastering our craft and staying abreast of developments in our industry and
- passing on this learning to others who would benefit from the information
The more wisdom we know, the more we may earn. That man who seeks to learn more of his craft shall be richly rewarded. (pg. 54)
Theme #5: Valuing Hard Work
Along with continuous learning comes the value of hard work. The stories in the book—the one titled “The Luckiest Man in Babylon” in particular—emphasize that hard work not only increases our potential to do well in life, but also makes us feel good about ourselves in our day-to-day activities.
His view? If we’re going to do work anyway, we should do it to the best of our ability as it’s a reflection of our value to the most important person who needs convincing from time to time, especially when the going gets tough: ourselves.
The Bottom Line
Read this book. Read it, share it, reread it. I doubt you’ll be disappointed. It has the potential to change the way you feel about and relate to money. Its place among the classics is well deserved.
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