Book Summary: The Richest Man in Babylon

The Richest Man in Babylon by George Clason

The Richest Man in Babylon is a book about financial wisdom which was compiled from various pamphlets written by George S. Clason in 1926. These pamphlets dispensed financial wisdom through parables set in ancient Babylon and were often distributed by Banks and Insurance companies.

If you are yet to earn your first income/salary, you must read this book to know well in advance how to manage and multiply your money and how to make it work for you instead of working for money.

Even if you have already earned your first salary/income, you should definitely read this book. Better late than never. The only regret you will have after reading this book will be of not reading it earlier in your life.

If you are already good at investing and wealth management, you should still read this book as it would be a refreshing read for even the most experienced investor.

 

Book Title: The Richest Man in Babylon

Author: George Samuel Clason.

About the Author: George Clason was a Writer, a Buseinessman and a Soldier. He served in the US Army during the Spanish-American War (1898). He also founded two companies i.e. Clason Map Company and Clason Publishing company.

 

This book is also available in Ebook and Hindi language @amazon.in

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The Richest Man in Babylon

    This book is one of the most inspiring books ever published on Saving, Wealth Creation and Asset Management. This book has sold more than 2 million copies and is still relevant even after almost a century of its publishing. The book uses parables written in archaic English words like thou, thy, ye and thee instead of you and your. (These are not spelling or grammatical errors as termed by some readers in book reviews on Amazon).

 

It gives 7 simple rules towards wealth creation and wealth management.

1. Start thy purse to fattening 
2. Control thy expenditure
3. Make thy gold multiply
4. Guard thy treasure from loss  
5. Make of thy dwelling a profitable investment
6. Insure a future income
7. Increase thy ability to earn

 

For those of you who find it difficult to understand above rules, I will simplify it in my own words.

 

    1. Start thy purse to fattening (Fatten your purse/Increase you income):

Find alternative sources of income apart from your main job. It can be an active income like a side-income or passive income like return on your investment

    2. Control thy expenditure (Control your expenditure):

Reduce your expenditure by identifying unnecessary expenses and avoiding it. Differentiate between 'Need' and 'Want'.

For example: A Car may come under 'Need' category but a luxury car should fall under 'want' category. So instead of buying a car worth 8-10 lac on EMI, buy a mid segment car worth 5-6 lac with only those features that you need and invest the excess amount in such a way that your fuel consumption, insurace and depreciation cost would be covered by the return received from that investment itself. This way you'll never have to pay for it.

    3. Make thy gold multiply (Multiply your money by investing it wisely):

Only savings is not enough, if you can't invest it wisely. Invest your savings in such a way that it either creates wealth for you in long term or at least give you good return at regular interval which may further expand your earning. Understand the power of compounding. Learn why it is called the eighth wonder of the world.

 

     4. Guard thy treasure from loss (Protect your assets from any possible loss by insurance):

It won't matter how much you own when you can loose it anytime in this world full of uncertainty. A powerful earthquake or Tsunami can destroy even the mightiest sky-scraper as easily as it can destroy a small cabin of woods. That's why it is important to insure you assets to mitigate any plausible risk.

    5. Make of thy dwelling a profitable investment (Make your home a profitable investment):

Instead of making your home a liability, convert it to your asset as early in life as possible. Always analyse what is better for you; To stay in a rented home by paying rent or invest the same amount in a home loan and buy your own home.

This will differ for each person. For someone who frequently changes work location, it may be preferable to stay on rent and for someone it may be a better option to buy a home.

 

    6. Insure a future income (Mitigate the risk of income shrinkage or loss of income):

As described in point 4 above, the world is full of uncertainty. A global recession can bring down your business any time and can affect your income adversely. To mitigate this risk, having a reserved source to cover your expenses in difficult time is essential. Just like we insure our assets, we must insure our earnings too.
 

    7. Increase thy ability to earn (Increase your ability to earn. Have more than one source of income.):

I have always believed that learning is an eternal process and you should keep honing your skills to keep up with the time.

Your income should keep pace with inflation and your skills should keep pace with changing time. If you don't upgrade yourself every now and then, you will soon become outdated and will be replaced by someone better than you. So it is essential to keep upgrading yourself and increase your ability to earn.

 ... TO BE CONTINUED

 

 

    This book is one of the best sources to learn about personal finances. It gives cure to a lean purse and suggests ways to fatten it. It takes you to the historic city of Babylon which, according to the author, is the cradle in which the basic principles of finance were nurtured.In Foreward of this book, Author George Clason explains the idea of nation building through wealthy individuals. A nation prospers when each of its citizen prospers individually. For this he gives example of Babylon; The Wealthiest City Of The Ancient World. It became wealthiest because of its citizens who were the richest people of their time. They did so by adhering to the basic principles of finance; i.e. To acquire money, keep it, multiply it and to make that money work for themselves.