The Richest Man in Babylon Summary and Review
“The Richest Man in Babylon” is a fictional story where a man with a fortune of one hundred million dollars is killed and the rest of the story details how his son deals with this terrible circumstance. The story is a parable, designed to show how individuals can be equally poor or rich, depending upon the choices they make.
One of the most famous stories in the Babylonian Epic of Gilgamesh, the epic is written around 2000 BC, and tells the story of the hero Gilgamesh, as he attempts to get back the elixir of life which was stolen from him by the gods. The story is famous for being the first known example of a rich man being able to become a god, and therefore having absolute authority over all living things.
George S. Clason’s The Richest Man in Babylon is undoubtedly one of the most popular personal finance books, and it has survived the test of time. It was first published in 1926 and is widely read and recommended today.
The book claims to reveal “personal riches secrets,” but does it live up to the hype?
I’ll help you determine if The Richest Man In Babylon is worth reading in my review and synopsis. Stay tuned for a summary of the book’s main teachings, as well as pros and drawbacks.
Points to Remember
- Overall score:
- Date of publication: 1926.
- George S. Clason is the author of this work.
- Page number: 102. (This varies depending on the copy you purchase.)
- What exactly is it about? The foundations of accumulating wealth and managing your finances properly.
- Who is it intended for? Beginners in personal finance or anybody who wants to brush up on the basics in a pleasant, engaging, and entertaining manner.
- The following are the most important lessons: Make a 10% or higher payment to yourself. Set aside 20% of your income for debt repayment. Spend no more than 70% of your income on expenditures. Work hard and properly invest your money.
George Samuel Clason was an entrepreneur and novelist from the United States who was born in 1872. He established two businesses, but is most known for a series of informative booklets on thrift and personal economics that he published in 1926. The financial principles he taught in the pamphlets were presented via fictitious tales set in Ancient Babylon, the most popular of which were collected and published in his book, The Richest Man in Babylon.
Fun fact: The term “pay yourself first” was coined by George S. Clason, and it is still one of the most popular (and successful) pieces of personal financial advice today. What a legendary figure.
What Is the Story of Babylon’s Richest Man?
The Richest Guy in Babylon is about an extremely wealthy (but fictitious) man who lives in Babylon, as the title implies. Arkad is that guy, and in the book, he reveals his methods to accumulating and maintaining riches.
The book also includes anecdotes and tales from other fictitious characters, all of which include underlying personal financial principles such as paying yourself first, managing your expenditures, investing properly, paying off debts, and appreciating your job.
The teachings in the book are still applicable now, and will be for the foreseeable future, despite the fact that it was written in 1926.
Who Should It Be Read By?
- Beginners in personal finance who wish to understand the basics of wealth creation and preservation.
- Anyone who wants to brush up on the fundamentals of personal finance in a pleasant and engaging way.
The Richest Man In Babylon: A Synopsis
Set aside at least 10% of your earnings to pay yourself first. With 20% of your salary, pay off whatever debts you may have. Never allow your living expenditures to surpass 70% of your gross income.
By completing your homework and getting assistance from others, you can safeguard and invest the money you save properly. Don’t fall for get-rich-quick scams or invest in items for which you don’t completely comprehend the dangers.
Finally, approach work like a friend and discover meaning and purpose in your job. Opportunity seeks out those who are willing to take action, and by continuing to learn and improve at your craft, you will be able to earn more money and improve your life and the lives of those around you.
The Richest Man in Babylon Teaches Us 8 Important Lessons
1. Take care of yourself first: 10% of your earnings should be set aside.
“Like a tree, wealth develops from a small seed. The first copper you save is the seed that will develop into your riches tree. The earlier you put the seed, the faster the tree will grow. And the more consistently you feed and water that tree with regular savings, the sooner you will be able to relax in its shade.”
Clason, George S. (p. 18)
The Richest Man in Babylon teaches the first and most essential basic concept of wealth creation. You’ve undoubtedly heard it before, too, since it’s one of the most popular pieces of financial advice on the internet today — and with good reason.
But, exactly, what does it mean to “pay yourself first”?
Simply put, set aside some money for yourself every time you are paid, before you pay anybody else (e.g., your internet service provider, landlord, food store, clothes store, etc.). This book suggests putting away 10% of your income, but you may always put aside more if you can.
This is how you’ll begin to grow your riches tree. If you do it long enough, you’ll amass a sizable amount.
Does it seem to be too basic to be effective?
“Do not dismiss what I say because of its simplicity,” Arkad would remark. The truth is always straightforward” (p. 27).
2. Make a debt repayment strategy: Contribute a total of 20% of your profits.
While The Richest Man In Babylon does not advise against taking on debt if it is for a good reason, it does advise against neglecting debt and failing to pay it off on time.
Debt will only become a larger monster if you ignore it.
Fortunately, by making a plan, you can make paying off your debts a lot easier. You may also create money if you follow the method outlined in the book.
This is how it works:
- Make a list of all of your debts – the first step is usually to become organized!
- Make a phone call to each of your creditors and explain your position to them – Tell them how much you owe overall, how much you can afford to pay them each month, and how long you expect it to take to pay them off completely. If you know your statistics and have a good strategy, most people will listen to you. They may even want to assist you.
- Contribute at least 20% of your wages to debt repayment — the book suggests dividing it evenly across all of your obligations. This may work, however if you want to be more efficient, you should look at other debt payment methods (e.g. debt snowball, debt avalanche).
A personal note: Even if you’re paying off debt, The Richest Man In Babylon advises continuing to pay yourself 10% of your income. You’ll still have “money to jingle,” which may be inspiring and encouraging.
While I believe this is a good idea when paying off debt with a lower interest rate (5 percent or less), such as a mortgage, I believe it is better to invest as much money as possible into high-interest debt (5 percent or more), such as credit cards, in order to pay it off as quickly as possible. You’ll save a significant amount of money in interest payments this way.
Debt-free? Congrats! Increase your “pay yourself first” payments to 30% and see how much money you save.
3. Keep your expenditures under control: Never let them surpass 70% of your income.
“Unless we resist, what each of us considers our ‘essential expenditures’ will constantly increase to match our incomes.”
Clason, George S. (p. 28)
You can never spend more than 7/10ths of your wages since you’re paying yourself 10% of everything you make and putting 20% toward debt (or additional savings).
But what if 7/10ths of your income isn’t enough to meet your living expenses?
If that’s the case, you’ll have to discover methods to save money.
(Don’t believe you can make any more cuts? Refer to the statement above, try again, and if you still can’t come up with a solution, it’s time to work harder.)
The problem is, often what we believe are essential expenditures are just items we desire – not necessities for survival or happiness. We’ll never have enough money to spend on the things we really enjoy if we attempt to purchase everything we desire.
What is the solution? Budgeting.
A healthy budget will enable you to afford the things that offer you the greatest pleasure, while avoiding the items that seem interesting or entertaining at first but fade after a while.
To put it another way:
A solid budget will enhance your life rather than detract from it.
To begin, review your previous purchases and begin recording all of your future expenditures (personal finance apps can help with this).
It will be simpler to identify areas where you can cut down once you have a clear picture of where your money is going. Continue to do this every month and make adjustments as needed.
“Let thy motto be one hundred percent of the coin’s appraised worth demanded.”
Clason, George S. (p.28)
4. Make your money work for you by allowing it to increase.
“A man’s riches is not in the money he carries in his wallet; it is in the income he earns, the golden stream that flows into his wallet and keeps it overflowing at all times. That is what everyone wishes for. That is what you, everyone of you, desire: a steady stream of money, whether you work or travel.”
Clason, George S. (p. 29)
It’s essential to put your money to work after saving 10-30% of your income. Instead of sitting in a savings account earning next to nothing (or even losing money due to inflation), it’s better to put it to work.
Consider each dollar as a separate employee. Your money can earn you more money, and the money you earn can help you earn more money, and so on.
Compound interest works in this way.
By using this magic, your money will continue to expand over time, and your wealth will increase tremendously.
This isn’t without danger, which is why the next lesson is so crucial:
5. Keep an eye on your money and make sure it’s safe.
“A little caution is preferable than a lot of regret.”
Clason, George S. (p. 66)
There is always some risk associated with every investment. It is your duty as an investor to manage that risk in order to preserve your original investment (i.e. the principal) as much as possible.
It’s also your job to ensure that the money you put into anything generates money, or, as the book puts it, “collects a reasonable rental.” There’s no sense in putting your money on the line for no return.
To help you safeguard your money, here are some suggestions from The Richest Man In Babylon:
- Don’t be fooled by get-rich-quick scams. In the vast majority of instances, offers that promise fast, simple, and big profits will end in money being lost soon.
- Do your homework. What risks are associated with the investment you’re considering? How likely is it that you’ll lose your principal? What are your projected profits if the venture succeeds? All of these factors should be taken into account prior to making an investment.
- Seek counsel from people who have greater expertise. Even if you’ve done your own research, it’s a good idea to get advise from someone who has more expertise than you (e.g. in the industry you’re intending to invest in, or simply with money in general). Inexperience or emotions may sometimes make us oblivious to apparent dangers.
- Diversify – By investing in a variety of regions, businesses, and industries, your entire portfolio will be less affected if one of your investments fails.
6. You have your own house.
The Richest Man In Babylon offers a number of reasons why buying a house is a smart financial and general investment:
- A higher standard of living
- You have the option of growing your own food.
- More liberty
- Living costs are lower.
Is this all real, or do you have any doubts?
As you may be aware, the decision to buy vs. rent a house is a contentious one in the realm of personal finance. Both have advantages and disadvantages.
I agree that having a home gives you more flexibility since you can customize it anyway you want, but the other arguments are questionable.
- Rentals can still provide a decent standard of living.
- In a rental, you can still produce your own food and plants.
- Finally, renting may be less expensive than buying in certain circumstances.
In the end, what’s best for you is determined by your circumstances and location.
Always keep in mind that a house that you reside in but does not generate money is more of a burden than an asset. It does not earn you money; rather, it deprives you of it. And, although it may grow in value, it may also depreciate.
7. Plan for retirement by saving and investing.
You’ll probably want (or have to) rest a little more as you grow older, and your active income will suffer as a result. That is why it is critical to begin accumulating a nest fund as well as any other income sources on which you may depend in your retirement years.
This may be accomplished by:
- Investing in stocks and bonds — As you move closer to retirement, you’ll want to alter your portfolio. In most nations, special accounts have been established up for this purpose (e.g. 401k or IRA in the U.S., RRSP or TFSA in Canada, etc.).
- Real estate purchases and rentals.
- As well as developing additional sources of passive income.
This is why the preceding lessons #4 and #5 are so crucial. You should begin putting your money to work as soon as possible, and as securely as possible, so that you have some money and income to depend on when you are no longer able or willing to work.
8. Increase your earnings by improving your abilities.
“The more knowledge we have, the more money we can make.”
Clason, George S. (p. 36)
Learning how to make more money is one of the most effective methods to improve your financial position. That’s why we put so much emphasis on it at Swift Salary. It’s also the last and most important lesson of The Richest Man In Babylon.
Here’s a short rundown of the advice in the book:
- Have a strong desire to make more money. You will not succeed unless you have a great desire.
- Begin small, but be precise. You’ll work toward bigger objectives (making an additional $1,000 per month) by completing a modest, targeted, and attainable goal (earning an extra $100).
- Concentrate on only one item at a time. You will get overwhelmed if you have too many objectives.
- Become an expert in your field. The more skilled you are at your job, the more money you can make. Find employment that interests you and that you can focus on for extended periods of time to make this simpler. The more time and effort you put into studying and perfecting your trade, the better you will become and the more money you will make.
- Take action and make work your buddy – Those who take action and make work their friend attract good luck and chances. Procrastination suffocates good fortune.
Review and Rating for The Richest Man in Babylon
The novel The Richest Man in Babylon is fantastic. The tales are amusing, and the lessons about frugality and personal economics taught in them are just as pertinent and useful now as they were when the book was first published in 1926. This book is a great place to start if you want to understand the basics of wealth creation and preservation.
Breakdown of the Ratings
Yes, the principles taught in The Richest Man In Babylon are straightforward and familiar. That doesn’t make them obsolete, however. The fundamental principles in this book may be life-changing for anybody new to money or trying to create wealth.
4/5 for conciseness
The Richest Man in Babylon is just 100 pages long, so it’s already a small novel, although it does include some repetition. The teachings might have also been condensed. Having said that, I believe the tales used to convey the lessons and the repeating of important themes bring a great deal of value to the book. They help you remember the lessons by giving you real-life examples of why they’re essential.
5 out of 5 for entertainment
Another reason the tales in this book are so valuable is that they keep you reading. There aren’t many personal finance books that make you want to keep turning the pages as much as this one does (at least, that’s how I felt).
4 out of 5 for readability
The Richest Man In Babylon is written in ancient English, which may not be to everyone’s taste. It’s possible that you’ll have to reread certain phrases a few times to fully comprehend them, but that’s not always a negative thing. It just takes some getting accustomed to. Personally, I thought the style to be pleasant and entertaining.
Advantages and disadvantages
- Lessons that are timeless – Almost everything in the book is still applicable today. George S. Clason does an excellent job of breaking down the basics of personal finance.
- Great storytelling – The tales in the book are what help the lessons stay in the reader’s mind and make the book enjoyable to read.
- Read it quickly.
- It may be difficult to read for some — the old-English style of writing isn’t for everyone.
- Repetitive – The same lessons are taught in various ways again and over again. While I think this is a positive thing since it makes the teachings more remembered, it may not be to everyone’s taste.
- The teachings are simple – if you’re searching for a comprehensive guide on earning money, saving money, and investing in today’s world, this isn’t it.
Should You Purchase It?
Despite the fact that I’ve described the major teachings from The Richest Man in Babylon above, I still strongly advise you to pick up this book and read it for yourself. I couldn’t post all of the excellent quotations since the book’s narrative is what truly makes the lessons stick.
However, if you’re already familiar with the fundamentals of personal finance, most of the concepts in this book will be familiar to you. That isn’t to say it isn’t worth reading. Even so, it’s a fun refresher with some excellent narrative!
Where can I get Babylon’s Richest Man?
I’m happy I got around to reading The Richest Man in Babylon at long last. I believe it delivered on its promise to a tee.
It teaches the basics of wealth creation in a fun, informative, and motivating manner, including paying yourself first, putting your money to work, dividing your money for desires, needs, and debts, and working hard to make money.
I hope you found my overview and review to be helpful. Please consider sharing it if you find it to be very useful.
Today’s topic is a study by the Princeton economists Mankiw and Taylor of the Babylonian economy in 600 BC. The researchers took advantage of the fact that the Babylonians kept very detailed records of their economy. They also used a remarkable degree of modern mathematical and statistical techniques to analyze the data, and their conclusions are profound.. Read more about the richest man in babylon pdf and let us know what you think.
Frequently Asked Questions
What is the main point of the Richest Man in Babylon?
The main point of the book is to teach people how to live a life that is rich in happiness, meaning and fulfillment.
What does The Richest Man in Babylon teach you?
The Richest Man in Babylon teaches you the importance of saving and investing. It also teaches you to live below your means, so that when you do make a lot of money, you can invest it wisely.
Is The Richest Man in Babylon a true story?
The Richest Man in Babylon is a fictional story.
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