Seven Cures for a Lean Purse
George S. Clason first published The Richest Man in Babylon in 1926. Told as a collection of narratives set in ancient Babylon (supposedly the wealthiest city in the history of the world), the book stresses simplicity and common sense in the management of one's finances.
The tales in Clason's book swirl around a group of simple characters differentiated by class — that is, those characters who are in difficult financial straits (and are looking to find a way out) take it upon themselves to meet with a few of their notably affluent fellow citizens. They then inquire as to the basis of the affluents' riches. There are few complicated remedies espoused by the Babylonian "financial gurus." Rather, these are the absolute basics of successful personal finance. Readers will see these same tenets rehashed and rephrased in just about every other personal-finance book out there.
The stream of money that flows into and out of one's life is immense. Wealth and security can be secured from it, but only if portions of that stream are diverted. Time and again, the book's "enlightened" characters stress saving at least ten percent of your income every month, without fail. Accomplish this by setting aside that ten percent before all other expenses are considered.
"But when I began to take out from my purse but nine parts of the ten I put in," Arkad said, "it began to fatten. So will thine."
The amount of money a person makes is important, but it is secondary to the degree to which that person controls his expenses. Budget and plan your expenses earnestly. Demand value for the dollars you spend.
"That what each of us calls our 'necessary expenses' will always grow to equal our incomes unless we protest to the contrary," Arkad stated. "Confuse not the necessary expenses with thy desires."
Three words: interest, interest, interest. Take care to see that all saved monies are kept in the highest-yield interest-bearing accounts available. If you have the experience and education to do so, invest a portion of your money by other means, always striving to create a reasonable risk/reward ratio.
"A man's wealth is not in the coins he carries in his purse; it is the income he buildeth. That is what thou desireth: an income that continueth to come whether thou work or travel."
Forget about gunning for those astronomical returns promised by market gurus and their "hot tips." And don't bother with those wacky startup businesses you see boxed in the classified ads, either. If you're going to take risks and invest your money, then make sure you have the education to know how to guard and protect your assets. Only you can keep your best interests at the forefront. Your savings control your future; treat them like it.
"The first sound principle of investment is security for thy principal. The penalty of risk is probable loss. Study carefully, before parting with thy treasure, each assurance that it may be safely reclaimed. Be not misled by thine own desires to make wealth rapidly."
In most cases, home ownership — even when financing is included — is preferable to renting. At some point, the mortgage payments will end, and ownership will be achieved. There is no ownership for the renter ... ever.
"Thus come many blessings to the man who owneth his own house. And greatly will it reduce his cost of living, making available more of his earnings for pleasures and the gratification of his desires."
The future cannot be known, but preparations can be taken to assure a certain level of financial safety. Whether this is done via a strict savings plan, outside insurance, or a combination of both, one must be careful to provide for the wellness of himself and his loved ones in later years. Disability and untimely death have caught and ruined families and their finances since time immemorial.
"No man can afford not to insure a treasure for his old age and the protection of his family, no matter how prosperous his business and investments may be."
Last among Clason's "cures" is action taken to increase one's earnings. Acquire education, experience, and confidence in yourself, and use these things to improve your income. You might begin a second, part-time job, or simply freelance your abilities in your spare time. Whatever you do, never underestimate the opportunity to turn a favorite hobby or skill (woodworking, photography, home decorating, cooking, etc.) into extra income.
"The more of wisdom we know, the more we may earn. The man who seeks to learn more of his craft shall be richly rewarded. Cultivate thy own powers, study and become wiser, become more skillful, and act as to respect thyself."