I am a bibliophile who loves to read about new concepts and ideas. The next step almost always involves testing them out in real life.
A Book from the 1920s
I recently read a personal finance book called “The Richest Man of Babylon” by George Samuel Clason. It is a lovely book, released way back in 1926, narrating the business and financial endeavors of the people of Babylon.
Compared to other personal finance books, this one is different in presentation. It is more like a story, jumping from one person’s experience to another, filled with monologues in ancient dialect. Each story talks about the character's own monetary struggles and the final path to wealth and prosperity.
There are a lot of personal finance gems in the book. Explains why the book has been in circulation for almost a century. It is considered a classic by investors and stock market gurus alike.
Here are the seven most thought-provoking quotes from the book followed by my own 2 cents on the topic.
1. On Taking Financial Advice From the Inexperienced
“He who takes advice about his savings from one who is inexperienced in such matters, shall pay with his savings for proving the falsity of their opinions.”
How often have we done this? We always ask for advice from people who are the least experienced in the subject. It is not just limited to financial matters. We ask for medical advice, skincare advice, fitness advice from relatives, friends, acquaintances, and social media. Not professionals. We think that since it works for them, it might work for us. When the truth is, we all need individualized help.
In the “Richest Man of Babylon”, a person enters into business with someone who is an amateur in the sector (he didn't know anything about construction) and ends up losing money. He then goes to a successful businessperson to learn the tricks of the trade.
Always be cautious of where you get your advice from.
2. On Saving One-Tenth of What You Earn
“For every ten coins thou placest within thy purse take out far use but nine. Thy purse will start to fatten at once and its increasing weight will feel good in thy hand and bring satisfaction to thy soul.”
Hypothetically, if you get 10 coins, save 1 for your future. That is how you build your wealth. Always save some part of your salary. The ideal percentage is 20%. It could be more, but 20% is a good start.
It might seem tough at first, but once you get into the flow of saving, you will end up thinking you should have started this much earlier.
3. On Not Living Within Your Means
“Now I will tell thee an unusual truth about men and sons of men. It is this: That what each of us calls our 'necessary expenses' will always grow to equal our incomes unless we protest to the contrary.”
What happens with most of us is that when our income grows, our expenses also grow exponentially. We want fancier cars, bigger houses, better appliances. It is fair. But this is also a matter of concern because then there will be no savings.
To counter this, the expenses should more or less stay the same even when your income increases. Try to live within your means. It is difficult because there are so many materialistic distractions around. But when you face such a hindrance, always keep your goal in mind. What are you saving for? For your future, your child’s future, for a house, for a business. Always keep the end goal in mind. This will make your journey smoother.
4. On Having Limited Desires
“There are limits to my time. There are limits to my strength. There are limits to the distance I may travel. There are limits to what I may eat. There are limits to the zest with which I may enjoy. I say to you that just as weeds grow in a field wherever the farmer leaves space for their roots, even so freely do desires grow in men whenever there is a possibility of their being gratified. Thy desires are a multitude and those that thou mayest gratify are but few.”
They say human wants are unlimited. The more we have, the more we covet. But what we actually need is far less. We have limits for everything as the author says. But when it comes to our desires, we like them unlimited and to take on more than is required.
To counter this, concentrate on ONE desire. And work towards that. Once that desire is fulfilled, choose another one. This way you are not running all over the place and left feeling unfulfilled in all areas.
Another quote in the book says:
“Desires must be simple and definite. They defeat their own purpose should they be too many, too confusing or beyond a man's training to accomplish.”
5. On Making Safe Investments
“Guard thy treasure from loss by investing only where thy principal is safe, where it may be reclaimed if desirable, and where thou will not fail to collect a fair rental. Consult with wise men. Secure the advice of those experienced in the profitable handling of gold. Let their wisdom protect thy treasure from unsafe investments."
If you want your investments to be safe, always consult professionals. Do a lot of research. Do not blindly trust. Investing is also dependent on your age and risk appetite.
If you are ready to face a small amount of volatility, invest in the stock markets. If not, stay away. Nothing is more important than a good night’s sleep.
As you near retirement, you might need to stay away from volatile financial instruments and stick to safer options.
6. On Saving In Advance for Retirement and Family
“Provide in advance for the needs of thy growing age and the protection of thy family."
This is a highly sensitive topic. Nobody likes to think about death, let alone talk about it. But for the well-being of our loved ones, we need to venture into uncomfortable grounds.
Life insurance is important if you have family members who are dependent on you financially.
Plan for all unexpected circumstances in advance, so that no one is left high and dry when you are not around.
7. On Taking Advantage of Opportunities
“I learned that to attract good luck to oneself, it is necessary to take advantage of opportunities. Therefore, in the future, I shall endeavor to make the best of such opportunities as do come to me.”
We want a lot of good things in life. But we do not always take that first crucial step needed for achieving our dreams. This is a problem faced by a lot of us (including yours truly). Because it is scary to step outside our comfort zones.
I have to time and again remind myself that what’s the worst that can happen? If it goes my way, great. It might also not go my way. In that case, the confusion is cleared. I need to try something else. I am not left thinking, “What would have happened if I had taken that opportunity?” because I was proactive in finding the answer out by myself.
To fulfill your desires, there are opportunities galore. We just need to be open to accepting them.
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© 2021 Kalpana Iyer