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“Our prosperity as a nation depends upon the personal financial prosperity of each of us as individuals.” These are the opening words to what has been called one of the greatest personal finance books of all time. Every list of recommended reading I’ve seen has had George S. Clason’s 1926 work, The Richest Man in Babylon, at or near the top. The book actually started out as a series of pamphlets that were issued by financial institutions to their customers, and were later compiled into a single volume. As such, it’s not one continuous story, but rather a set of parables all set in the ancient city of Babylon, presumably to give the feel of timelessness to the lessons that are presented.
If you’re not familiar with the concept of a parable, think of them like Aesop’s fables; each story, while fictitious, is based on very real principles and has a very real lesson. As we travel back to Babylonian times, we met several characters, each of which has problems that are familiar to many of us here in the present. Working long days at a hard job and never seeming to get ahead. Feeling like the only way to get rich is through the lottery. Being envious of the friend that grew up in the same circumstances we did, yet now has enormous wealth. In each parable, Clason reiterates the importance of personal responsibility, hard work, and having clear goals.
There are two sort of cornerstone parables in the book: The Seven Cures for a Lean Purse and The Five Laws of Gold.
The Seven Cures for a Lean Purse
Told by Arkad, the man named in the title of the book, in a consultation with the king of Babylon. The king was worried about the prosperity of his people, and trying to determine how to close the gap between the super-wealthy and the working class. Arkad, himself being one of the super-wealthy despite coming from the working class, had the following pieces of advice for the king:
- Start Thy Purse To Fattening – Regardless of what you currently make, begin saving now.
- Control Thy Expenditures – Avoid lifestyle inflation, and be honest when deciding what’s a “need” vs. a “want.”
- Make Thy Gold Multiply – Invest wisely and continuously. Don’t take wild risks, but don’t hoard your savings under your mattress.
- Guard Thy Treasure From Loss – Going along with #3, use wisdom in determining where your money will go. If something seems like an unstable investment, stay far away from it.
- Make of Thy Dwelling a Profitable Investment – Real estate is a great asset, provided it’s purchased wisely. Owning is better than renting in terms of improving net worth.
- Insure a Future Income – Don’t pretend like you’ll never get old. Saving now for retirement, while unglamorous, will ensure that you’ll still have an income even after you can’t work anymore.
- Increase Thy Ability to Earn – Always, always be improving yourself. Read books, take classes, work hard, and look for opportunities to advance.
The Five Laws of Gold
Apparently after Arkad died, his Seven Cures didn’t take hold very well, because there was no shortage of Babylonians still looking to lift themselves out of poverty. Thank goodness Kalabab is still around, a wise man who knew of Arkad’s wisdom through a conversation with Arkad’s son, Nomasir. Arkad had apparently condensed his Cures and written them down on a tablet, given it to Nomasir, who then relayed it to Kalabab.
- Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family. Again, saving from what you earn is the easiest way to begin building wealth.
- Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field. Stashing money in a jar won’t do it when it comes to growing your savings. It might be physically safe, but it will lose value to inflation.
- Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling. Especially when beginning to invest, listen to the advice of others.
- Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those who are skilled in its keep. Don’t invest in anything you don’t understand. Pretending to know the ins and outs of something so complex is the surest way to lose money.
- Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment. Invest with your head, not your heart. That’s not to say that you can’t put your money into things that are emotionally important to you, but be aware that people are always willing to scam, cheat, and trick you out of what you’ve earned.
There are several other lesser parables mixed in throughout the book, and they all point back to these same principles, maybe just from a different angle.
The Good: Clason’s book, though written almost 100 years ago, is still relevant today. All throughout it, he discourages people from blaming their surroundings if they’re not where they want to be financially. He reiterates over and over again that personal responsibility can go a long way in overcoming adversity, a message that I think our culture needs to hear. The parables he uses are short (remember, they used to be pamphlets), which makes them easily digestible. He explains his points in a way that makes them accessible to everyone.
The Bad: In an effort to make the parables seem more “authentic,” Clason mixes in Elizabethan English to the characters’ dialogue. You can see that in the Seven Cures and the Five Rules above. It’s not a huge issue, but it actually seems to cheapen the book a little because of how disjointing it is. To make it worse, his characters seem to go in and out of the dialect as they speak, alternating between sounding like Shakespeare and sounding like you and me from one sentence to the next.
Buy/Borrow/Pass: Buy. The Richest Man in Babylon is an enduring book whose value is easily understood. The parable structure make it different than many other “follow this step-by-step process” personal finance books, and can be a good way for someone with a different learning style to pick up on timeless values. Plus, with the Kindle version available for $1.99, it’s a great addition to your library.