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3 Personal Finance Lessons From the Richest Man in Babylon

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Image by Pixabay

3 Personal Finance Lessons from The Richest Man in Babylon

I have recently finished reading a fictional tale that is widely revered in the personal finance community.

It is called The Richest Man in Babylon and it offers a myriad of lessons when it comes to managing, saving, and investing one's money.


1. Always Save 10% of Each Paycheck

I myself am a bit of a spendthrift, but I am gradually learning to remedy this problem, and this one simple strategy has led to quite a few extra dollars in my bank account: That seemingly meager 10% adds up a lot faster than you might think!


2. Invest in Assets

I honestly think this book is a bit dated: One character instructs the other to purchase a home because he genuinely believes it's an asset.

He also recommends paying it off sooner than later so that the guy's family can be well-fed and well-taken care of with a roof over their heads.

Now, there is certainly something to be said for this: It's challenging to make ends meet when you have no place to stay.

That being said, the idea of viewing a house as an asset is one of much contention in the personal finance community, and it has been for decades.

Let me explain.

Purchasing a home as your primary residence is seen as an uninformed financial decision by many.

The home is viewed as a liability: You are getting no return on your investment, you are generally in debt for around thirty years, and you are forced to pay a certain amount of money every single month, plus interest.

Now, some people love their homes and want to live in an area for the rest of their lives. They also enjoy having the extra space if they are raising a family but, all of that being said, there is still a widely held general consensus that owning one home as your primary residence is a liability at the end of the day because that money is coming out of your pocket, and you're obligated to pay that mortgage for an extended period of time, whether your circumstances change or not.

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On the other hand, investing in prime real estate and renting it out is immensely profitable in many cases.

Investment properties are unquestionably an asset: They are putting money in your pocket—If you want to buy your own home afterward, you can pay for it with passive income!

While I disagree that owning your own home is of the utmost importance, I do think it's essential to get your hands on some assets that generate cash flow, whether those are dividend stocks or real estate properties—Even wine is doing quite well these days!


3. Be Careful Who You Give Your Money to

Have you ever been approached by someone trying to sell you something you know isn't worth it: A facial cream that will "completely eliminate" every wrinkle, a deodorant that will "solve all of your problems with the opposite sex," or even perfume that they promise will "have lovers approaching you in droves"?

The main character faces various similar situations: All are akin to some sort of marketing hype.

He ends up giving away his precious coins only to be deeply disappointed by the lack of results he receives—results he was promised.

Finally, he speaks to a man who is much richer than he is and realizes that he should only trust experts in any industry with his money: He shouldn't expect jewels from the bricklayer or bricks from the jeweler.

He realizes he really ought to be more careful with his resources in the future—after losing all of his money with nothing to show for it—and he takes pause.

Only spend your money if it's worth it to do so: Don't trust people with your cash if you know they aren't going to deliver on their promises.

I thoroughly enjoyed this short book which contained so many lessons about personal finance, and I highly recommend it!

If you opt for the collector's edition—which I did because I'm a total bookworm and want to keep my copy forever!—you will have access to a myriad of ornate illustrations as you read this compelling tale from cover to cover


The Richest Man in Babylon

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2022 Daniella Cressman

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