The Richest Man in Babylon – Book Summary
The Richest Man in Babylon is one of the best books written on investing ever and it is my personal favorite.
Here are the 5 Takeaways from The Richest Man in Babylon written by By George Clason.
Take Away Number one: Pay Yourself First
I found the road to wealth when I decided that a part of all I earned was mine to keep. And so will you. But it should not be less than one-tenth of your earnings.
For example, you make 50,000 rupees per month and pay 20,000 as rent, you’re essentially working 40% of your hours for your landlord.
It can be quite powerful to you view every rupee you spend as your labour going to someone else. If you change your mind set on how you view money it might be easier to handle your unnecessary spending.
In the book, it’s suggested that one-tenth of your earnings should be paid to you before any other payments are made. This way you are working for yourself before ‘slaving’ for others.
If your monthly income is 50,000 rupees, you should save at least 5,000 rupees first and the remaining should be used for expenditure.
When it comes to savings, general approach is to get the salary, spend it on expenses and save the remaining. This is completely wrong.
Correct approach is, when you get an income, save a pre-decided portion first and spend the remaining.
Take Away Number 2: Men Of Action Are Favoured By The Goddess Of Luck
A lot of people view others success as nothing but luck. They’ve convinced themselves that others are only successful because they have special talents, they’ve met the right people at the right time, or they were just born into a success filled life.
While there are some cases that this is true, especially for those born into it, for the majority of successful individuals luck isn’t a common theme. For the majority, action has been the common factor between them.
Let’s image there are two individuals, someone who is a complete procrastinator and someone who is a Doer. If both people were presented with the same opportunities, and the chances of success for each individual doesn’t change, so both the procrastinator and Doer have the same chance to thrive.
The only thing that separates them is the attitude they take when the opportunity presents itself.
The procrastinator would come up with excuses or would let the opportunity slip by. They might say something like, they don’t feel like it, it’s too late someone else took it, or they don’t want to have to do extra work.
With a Doer, these thoughts never even cross the mind. Every opportunity they feel has potential is taken on. Even if not everything works out the chances of ‘being lucky’ increase with every opportunity taken.
So, if you want to be lucky, start taking action now, don’t let any opportunity to slip by.
Take Away Number 3: Wealth Is Not A Matter Of Income
There are a lot of individuals out there who earn a lot of money, some six-figure salaries, yet they have nothing in their bank accounts.
Whenever they get a raise in their income, their expenses get higher as well. They upgrade their cars even though their old one works fine, they buy a bigger house despite their current one fitting them well enough, they spend until there’s nothing left.
This is foolish in many ways. If there’s ever a case that they lose their jobs they don’t have anything to do but panic.
They have to make sure to do all they can to not get fired, working extra hours, doing jobs beyond their job description, putting up with people they don’t like just because there’s nowhere else for them to go.
Most of people would love to quit their jobs and tell their bosses a few choice words. They have no issue talking behind their employer’s backs, but they show up the next day with a fake smile on their face ready looking forward to the weekend so their misery can end.
There are many individuals who have stories of making it big and ending up with nothing in the end. Just do a google search on all the lottery winners, wealthy celebrities, and large sum inheritance owners who end up broke because they fail to live by a simple rule.
It doesn’t matter how much you earn, all that matters is how much you keep/save/invest.
Remember, Income-Savings = Expenditure, not the other way around.
Take Away Number 4: Act when the time is right
The first sound principle of investment is security for your principal. Is it wise to be intrigued by larger earnings when your principal may be lost? I say not. The penalty of risk is probable loss.
Study carefully, before parting with your treasure, get full assurance that it may be safely reclaimed. Be not misled by your own romantic desires to make wealth rapidly.
If you’ve done your studies and know about possible shortcomings and know what you’re doing, don’t be afraid of acting upon good investments.
Opportunities are rare and shouldn’t be missed out on. Sometimes sacrifices in your usual spending habits like bigger house, new car, dream vacation need to be made to ensure you’re taking up the opportunity.
With that said you can only know what a good deal is, if you know what you’re doing. Partaking in a deal that you have little to no knowledge on can lead to bad results.
There’s no shortage of get-rich-quick schemes out there. As long as there are fools with their money there will be swindlers to take it.
This is why it’s important to only invest in things you know and to do it before it disappears.
Take Away Number 5: The Power Of Passive Income
A man’s wealth is not in the coins he carries in his purse; it is the income he build, the golden stream that continually flow into his purse and keep it always bulging. That is what every man desire. That is what you, each one of us desire; an income that continue to come whether you work or travel.
After you’ve mastered the first lesson, pay yourself first, you will accumulate wealth over time. While this can feel good on its own, there’s more you can do with it than letting it sit.
As soon as you can put your money to work, it will multiply itself. The best part about money is it never gets tired; it can work all hours of the day.
This is what people refer to as passive income. It’s income that will come to you while you sleep, while you workout at the gym, while you’re hanging out with friends.
As your money starts to multiply, you can take the multiplied money and let it work for you as well.
This is the power of exponential growth, it makes it easier and easier to make more money, the more you get.
So, let’s have a Recap of the takeaways:
- Pay yourself first
- Men of action are favoured by the goddess of luck
- Wealth is not a matter of income
- Don’t be quick to partake in a bad deal
- The power of passive income
What’s your plan to generate passive income? Let us know your thoughts in the comments section.