- Kimberly White/Getty
The 1926 personal-finance classic offers money advice in a collection of parables based in the ancient city of Babylon. It follows the story of Arkad, the son of a humble merchant who grows to become the richest man in Babylon. Arkad then shares the “secret to wealth” with the rest of the city, starting with what he calls the “seven cures for a lean purse.”
Here are the “seven cures,” in Clason’s words and ours.
‘Start thy purse to fattening’: Save 10% of your income
Getting rich all begins with paying yourself first. More specifically, set aside a minimum of 10% of your earnings, Arkad advises: “For every ten coins thou placest within thy purse, take out for 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 they soul.”
Anyone – rich or poor – can put money aside and let it accumulate, Arkad assures his class. You just have to commit to setting aside a minimum of 10%, and you’ll learn to live without it.
Today, it’s even easier to learn to live without a certain chunk of your income, thanks to technology. You can automatically deposit money from your paycheck and checking account into a retirement account, savings account, or other investment vehicle, removing the temptation to spend. If you never see it, you’ll learn to live without it.
“I, too, carried a lean purse and cursed it because there was naught within to satisfy my desires,” the richest man in Babylon explains to his class. “But when I began to take out from my purse but nine parts of ten I put in, it began to fatten. So will thine.”
- Flickr / EladeManu
‘Control thy expenditures’: Spend less than you make
The next step is to simply spend less than you earn, which is easier said than done. Our consumer-driven society makes it incredibly easy to overspend – and what’s more, when income increases, people have a tendency to boost their spending. It’s called “lifestyle inflation.”
“What each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary,” Arkad explains. “Confuse not the necessary expenses with thy desires.”
To control your expenses, you have to become a conscious spender and recognize where your money is going. A good starting point is to record all of your purchases (whether in a notebook, through an app like Mint, or on an Excel spreadsheet) and analyze your spending patterns.
“Study thoughtfully thy accustomed habits of living,” Arkad says. “Let thy motto be one hundred percent of appreciated value demanded for each coin spent.” Even if you’re well on your way to accumulating a fortune, the habit of living below your means still applies. There are a surprising number of frugal billionaires who choose to save or give to charity, rather than drop their money on jets, yachts, and mansions.
‘Make thy gold multiply’: invest
Once you’ve made a habit out of controlling your expenses and setting aside at least 10% of your income, put that money to work.
“The gold we may retain from our earnings is but the start,” says Arkad. “The earnings it will make shall build our fortunes … Learn to make your treasure work for you. Make it your slave. Make its children and its children’s children work for you.”
Making your money your “work for you” is the modern-day equivalent to smart investing. You can invest through your employer’s 401(k) plan or other retirement accounts, such as a Roth IRA or traditional IRA. Thanks to compound interest, your savings can grow tremendously over time – the trick is to set aside money regularly and to start as early as possible.
If you still have money left over after maxing out retirement accounts, you can research low-cost index funds, which Warren Buffett recommends, look into the online investment platforms known as “robo-advisers,” and consider investing in the stock market.
4. ‘Guard thy treasures from loss’: Make smart investments
There is always going to be a level of risk involved in investing, which is why it’s crucial to be smart about where you invest your money.
“The first sound principle of investment is security for thy principal,” says Arkad. “Is it wise to be intrigued by larger earnings when thy principal may be lost? I say not. 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 romantic desires to make wealth rapidly.”
Investing is a long-term game and the “get rich quick” mindset will only set you back. As legendary investor Warren Buffett likes to say, “It’s pretty easy to get well-to-do slowly. But it’s not easy to get rich quick.”
It can be tricky to figure out the best way to put your money to work, but you don’t have to go at it alone and you don’t have to be an expert to invest. There are financial planners, wealth advisers, and robo-advisers to guide you. There is also an abundance of accessible information out there if you want to be a more hands-on investor. Check out some of our favorite books and podcasts that cover investing basics, strategies, and tips.
“Consult with wise men,” advises Arkad. “Secure the advice of those experienced in the profitable handling of gold. Let their wisdom protect thy treasure from unsafe investments.”
- REUTERS/Mark Blinch
‘Make of thy dwelling a profitable investment’: Invest in a home
“I recommend that every man own the roof that sheltereth him and his,” Arkad tells his class. “Nor is it beyond the ability of any well-intentioned man to own his home.”
Today, this topic is heavily debated, and there is no one, universal answer to the buying or renting question – however, Arkad argues that “to own his own domicile and to have it a place he is proud to care for, putteth confidence in his heart and greater effort behind all his endeavors.”
- Flickr / Ruth Temple
‘Insure a future income’: Plan ahead for retirement
“The life of every man proceedeth from his childhood to his old age,” says Arkad. “Therefore do I say that it behooves a man to make preparations for a suitable income in the days to come, when he is no longer young, and to make preparations for his family should he be no longer with them to comfort and support them.”
Today, we call “the days to come” retirement. Time is your biggest asset when it comes to investing in retirement accounts – thanks to compound interest – so the earlier you can start saving for retirement, the better off you’ll be. If you’re not sure how prepared you are, read up on signs you won’t have enough stashed away for a comfortable retirement.
As far as making preparations for your family upon your death, or should you be in some way disabled, we now have insurance policies for these situations that you may want to consider: life, disability, and long-term care.
Read up on how to ensure your wealth lasts a lifetime.
- Luke MacGregor/Reuters
‘Increase thy ability to earn’: Continually self-educate
“The more of wisdom we know, the more we may earn,” preaches Arkad. “That man who seeks to learn more of his craft shall be richly rewarded.”
Rich people choose to constantly learn and grow – they would rather be educated than entertained, even after they’ve attained incredible success. Take Warren Buffett, for example, who estimates that 80% of his working day is dedicated to reading.
“Cultivate thy own powers, to study and become wiser, to become more skillful, to so act as to respect thyself,” says Arkad. “Thereby shalt thou acquire confidence in thyself to achieve thy carefully considered desires.”