The Richest Man in Babylon is a series of whimsical parables written by George Samuel Clason beginning in 1926. Originally written in pamphlet form they were distributed by banks and insurance companies by the thousands. The pamphlets were later compiled into a book by the same title. Clason dispenses his financial advice through a series of tales set in ancient Babylon where the characters learn principles of business and household finance. That financial advice is as relevant today as it may well have been in ancient Babylon.
Space is not sufficient to highlight the practical applications to all the parables contained in this little paperback book. Suffice for this article to address one of the key principles relayed by Arkad, the lead character, to his two friends Bansir and Kobbi when as a young man, he sought to discover the secret of accumulating wealth. That first secret, applicable to both individuals and business owners alike is – a part of all you earn is yours to keep.
Like Akrad, business owners likely respond that “all of what they earn is mine to keep, is it not?” As Algamesh (the money lender and teacher) responded to Akrad, “far from it.” Monies we earn seep through our fingers into the many hands that vie for a piece of our revenue pie. Payments are made for the various items considered necessary for the success of the business such as material, labor and overhead items such as supplies, equipment or building rent, utilities, computers and a host of other items. Businesses often find that costs seemingly expand to equal or exceed available earnings. So what’s a business to do?
Akrad found that when he was disciplined and only spent nine tenths of what he made, he was no shorter of funds than when he spent it all. The key then is discipline and is applicable to businesses today. All expenses must be reviewed and either reduced or eliminated where possible. The key to implementing the principle a part of all you earn is yours to keep is to be disciplined to reduce expenses until 10 percent of revenue is freed up.
But it’s not enough to set aside the a portion of your earnings, you must put those earnings to work “which is a child that can also earn for you.” You then must put the children of your children to work and so on. As Algamesh wisely states, “If you want to become wealthy, then what you save must earn, and its children must earn, that all may help to give you the abundance you crave.” “Wealth, like a tree, grows from a tiny seed…The sooner you plant that seed the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you back in contentment beneath its shade.”
There are profound bits of wisdom in The Richest Man In Babylon. I encourage the reader to explore its riches.