George S. Clason issued the first of a famous series of pamphlets on thrift and financial success, using parables set in ancient Babylon to make each of his points.
He believed that the prosperity of a nation depends upon the personal financial prosperity of each of it’s individuals. Success means accomplishments as the result of our own efforts and abilities. But first of all everyone needs to develop understanding of personal finance.
Our acts can be no wiser than our thoughts.
Our thinking can be no wiser than our understanding.
This book, first published in 1926, has been termed a guide to financial understanding for ‘lean purses.’
The Richest Man in Babylon Book Summary
Note: This summary is made up of my notes, thoughts and highlights of important passages while reading the book. I keep updating the summary when I revisit it, and occasionally may edit it to reduce summary length. Don’t be surprised if it has changed between visits. The author’s words are in normal font, while my interpretations are in italics.
The Man Who Desires Gold
- No one lends his entire fortune, not even to his best friend.
- A man’s wealth is not in the purse he carries. A fat purse quickly empties if there be no golden stream to refill it.
- All wish for an income that will keep flowing into their purse whether they sit idle or travel to far lands.
- In those things toward which we exerted our best endeavors we succeeded. The reason why we have never found any measure of wealth. We never sought it.
Wisdom about Money and Wealth
The richest man in Babylon shares his wisdom on wealth.
- If you have not acquired more than a bare existence in the years since we were youths, it is because you either have failed to learn the laws that govern the building of wealth, or else you do not observe them.
- In my youth I looked about me and saw all the good things there were to bring happiness and contentment. And I realized that wealth increased the potency of all these.
- Wealth is a power. With wealth many things are possible.
- All men have time in abundance. You have let slip by sufficient time to have made yourselves wealthy.
- When youth comes to age for advice he receives the wisdom of years. But too often does youth think that age knows only the wisdom of days that are gone, and therefore profits not.
I found the road to wealth when I decided that a part of all I earned was mine to keep.
And so will you.
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.
- If you did keep for yourself one-tenth of all you earn, how much would you have in ten years?
- Money you save is a slave to work for you.
- If you would become wealthy, then what you save must earn, and its children must earn.
Wealth, like a tree, grows from a tiny seed.
The first copper you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed the sooner shall the tree grow.
And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade.
- He who takes advice about his savings from one who is inexperienced in such matters, shall pay with his savings for proving the falsity of their opinions.
- No one could fill that place until he had for himself worked out his own understanding, until he was ready for opportunity.
- Opportunity is a haughty goddess who wastes no time with those who are unprepared.
- When I set a task for myself, I complete it. Therefore, I am careful not to start difficult and impractical tasks, because I love leisure.
Wealth grows wherever men exert energy.
- Ensure an income for your future. Look at the aged and forget not that in the days to come you will join them. Therefore invest your treasure with greatest caution that it be not lost.
- Usurious rates of return are deceitful sirens that sing but to lure the unwary upon the rocks of loss and remorse. A small return and a safe one is far more desirable than a high return with risk.
- Enjoy life while you are here. Do not overstrain or try to save too much. If one-tenth of all you earn is as much as you can comfortably keep, be content to keep this portion. Life is good and life is rich with things worthwhile and things to enjoy.
Seven Cures for a Lean Purse
That which one man knows can be taught to others.
The First Cure – Start thy purse to fattening
- There are many trades and labors at which men may earn money.
- If you desire to build a fortune, start by utilizing that source of wealth that is already established.
- For each ten coins I put in, to spend but nine.
The Second Cure – Control thy expenditures
- What each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we control them.
- All men are burdened with more desires than they can gratify.
- Budget for necessary expenses. Touch not the one-tenth that is fattening your purse. Let this be your great desire that is being fulfilled.
The Third Cure – Make thy gold multiply
- Fortunes are built by the power of compounding.
- The savings from your earnings are but the start. The earnings the savings will make shall build your fortunes.
- A man’s wealth is the income he builds, the golden stream that continually flows into his purse and keeps it always bulging.
The Fourth Cure – Guard Thy Treasures From Loss
- Guard your savings from loss by investing only where the principal is safe, where it may be reclaimed if desirable, and where you will not fail to collect a fair income (rental, interest).
- Consult with wise men. Secure the advice of those experienced in the profitable handling of gold.
- Let their wisdom protect thy treasure from unsafe investments.
The Fifth Cure – Make of thy dwelling a profitable investment
- Own your home.
- No man’s family can fully enjoy life unless he own’s his home.
- When the house is built, you can pay the bank with the same regularity as you paid the landlord. Because each payment will reduce your debt to the bank, a few years will satisfy his loan.
The Sixth Cure – Insure a future income
- A man may buy houses or lands for this purpose.
- A man may deposit this money in the bank or invest it wisely and increase it at regular periods.
- Provide in advance for the needs of growing age and the protection of family.
The Seventh Cure – Increase thy ability to earn
- Preceding accomplishment must be desire.
- Desires must be simple and definite. They defeat their own purpose should they be too many, too confusing, or beyond a man’s training to accomplish.
- More interest in my work, more concentration upon my task, more persistence in my effort.
- The more of wisdom we possess, the more we may earn. That man who seeks to learn more of his craft shall be richly rewarded.
- Thus the seventh and last remedy for a lean purse is to cultivate your own powers, to study and become wiser, to become more skillful, to so act as to respect yourself.
Goddess of Good Luck
If a man be lucky, there is no foretelling the possible extent of his good fortune. Pitch him into the Euphrates and like as not he will swim out with a pearl in his hand.
– Babylonian Proverb
- The desire to be lucky is universal.
- Good luck waits to come to that man who accepts opportunity.
- Good luck flees from those who procrastinate and let the opportunity vanish.
Men of action are favoured by the goddress of good luck.
The Five Laws of Gold
Gold is reserved for those who know its laws and abide by them.
- Gold comes 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.
- Gold labours diligently and contentedly for the wise owner who finds for it profitable employment, multiplying continuously.
- Gold clings to the protection of the cautious owner who invests it under the advice of men wise in its handling.
- Gold slips away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.
- Gold flees the man who would force it to impossible earnings or who follows the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.
Wealth that comes quickly goes the same way.
Wealth that stays to give enjoyment and satisfaction to its owner comes gradually, because it is a child born of knowledge and persistent purpose.
On Borrowing and Lending
- If you desire to help your friend, do so in a way that will not bring your friend’s burdens upon yourself.
- The safest loans are to those whose possessions are of more value than the one they desire.
- Some labor or serve and are paid. They have income and if they are honest and suffer no misfortune, they can repay the loan and the rental (or interest) to which I am entitled. Such loans are based on human effort.
- Those who have neither property nor assured earning capacity will get smaller loans and they must be guaranteed by good friends of the borrower who know him to be honorable.
- Humans in the throes of great emotions are not safe risks for a lender.
- Hopeless debt is like a deep pit into which one may descend quickly and where one may struggle vainly for many days.
- If you want to lend money it so that it may earn you an income, then lend with caution and in many places (diversify).
- If you risk losing your money, you risk losing all that it would earn as well.
On working for yourself
- If a man has in himself the soul of a slave will he not become one no matter what his birth, even as water seeks its level?
- The soul of a free man looks at life as a series of problems to be solved and solves them, while the soul of a slave whines.
- Where the determination is, the way can be found.
- No work to do is bad for any man.
Cling no longer to thy master.
Get once again the feeling of being a free man. Act like a free man and succeed like one!
Decide what thou desirest to accomplish and then work will aid thee to achieve it..
Simple Personal Finance Plan
Great is the plan for it leads us out of debt and gives us wealth which is ours to keep.
- To provide for your future prosperity, set aside minimum one-tenth (10%) of all you earn for yourself. Set aside more if you can afford. Pay yourself first. Make this sum work for you in line with “The Third Cure – Make thy gold multiply.”
- Spend seven-tenths (70%) of all you earn to provide a home, clothes to wear, and food to eat, with a bit extra to spend, that your life is not lacking in pleasure and enjoyment.
- Plan to repay or prepay debt. Pay or pre-pay debt with two-tenths (20%) of all you have earned should be divided honorably and fairly among those who lent you money. More if you can afford.
Thy debts are thy enemies.
Read More Like This
- Managing Oneself by Peter Drucker
- Why We Sleep by Matthew Walker
- The Subtle Art of Not Giving a F*ck by Mark Manson
Recent Articles
Great Article
This book has great concepts and I need to read it again! The only thing I would say is that young people should invest in things that are a higher risk. Just don’t do it irresponsibly.