May 24, 2008


This week I began reading again The Richest Man in Babylon, a small book my dad first introduced me to sometime during my teenage years. The easy read is a financial classic; the principles of prosperity encapsulated therein have merely been echoed over the past 80+ years (since first being introduced in 1926). None of these concepts will likely be a revelation to you, yet people consistently struggle with them. The following statement from the text is on the mark. "Deride not what I say because of its simplicity. Truth is always simple."


1. For every ten coins thou placest within thy purse take out for use but nine. Two timeless concepts are illustrated: (a) spend less than you make; and (b) save 10% or more of what you earn.

2. Control thy expenditures. Do not confuse needs with wants. "All are burdened with more desires than they can gratify." Budget - 'keep working with thy budget, keep adjusting it to help thee. Make it thy first assistant in defending thy fattening purse... like a bright light in a dark cave, a budget shows up the leaks from thy purse and enables thee to stop them and control thy expenditures for definite and gratifying purposes.'

3. Make thy gold multiply. "Gold in a purse is gratifying to own and satisfieth a miserly soul but earns nothing. The earnings it will make shall build our fortunes." It was Albert Einstein that referred to compound interest as the 8th wonder of the world.

4. Guard thy treasures from loss. "Study carefully [consult with wise men], before parting with thy treasure, be not misled by thy own romantic desires to make wealth rapidly ... Before thou entrust it as an investment, acquaint thyself with the dangers which may beset it."

5. Make of thy dwelling a profitable investment. 'Own thy own home ...'

6. Insure a future income. Suggests utilizing the benefits of the time value of money (power of compounding) to set aside [consistently] now for future years when one's earning ability is diminished. Even saving small amounts can become large sums when done consistently over a long period of time.

7. Increase thy ability to earn. "Cultivate your powers to study and become wiser, to become more skillful ... have an interest in what you do, a concentration upon your task, more persistence in effort ... and you will find your ability to earn increase. The more of wisdom we know, the more we may earn. Be in the front rank of progress and not stand still, lest you be left behind."