Interested in Money? Let us go back to Babylon
George Samuel Clason was a very interesting man. He was born in 1874 in the US and his first passion was maps; he started the Clason Map Company and published the first road atlas of the United States and Canada. He is best known, however, for writing a series of pamphlets on financial success, management and frugal living. They were written as parables and set in ancient Babylon. Intended to support the development of financial awareness and basic education amongst ‘normal’, working Americans these were widely distributed by banks and insurance companies. Shortly before and during the Great Depression these pamphlets reached millions of Americans; today they have become a modern day classic. They share simple and easy to implement principles of personal finance management which have not lost their power.
All parables are set in ancient Babylon which is the cradle of banking, finance and simple but sound finance principles. Clason offers an overview of the development of Babylon which whilst rather schematic as a historical account provides the background to the stories and encapsulates one of their main messages: your financial destiny is in your own hands. To achieve success you have to learn to recognise opportunities and act on them.
This is a book brimming with nuggets of money wisdom. But the ones that I have set myself the task to master are the three rules of financial success:
Live upon less than you could earn;
Seek advice from the ones who are competent through their experience; and
Make gold work for you.
According to Arkad, the main character in the stories and the Richest Man in Babylon, there are ‘seven cures for a lean purse’. These are:
Cure One: start thy purse fattening. Save ten percent of all your earnings irrespective of how much you earn. Soon money will grow and so will your feeling of security and satisfaction.
Cure Two: control thy expenditure. Here Arkad teaches the men of Babylon not to confuse their necessities with their desires and to learn to budget so that all their needs, their enjoyments and their desires could be met without touching the ten percent that is fattening their purses.
Cure Three: make thy gold multiply. Although having money saved and your purse heavy is gratifying this is just the beginning. Money has to be invested so that it can work for you and reproduce its kind; this way more money will flow into thy purse.
Cure Four: guard thy treasures from loss. Invest only where your money is safe; where it can be reclaimed if desirable and where a fair rental can be collected. To do that consult with wise people experienced in the profitable handling of gold.
Cure Five: make of thy dwelling a profitable investment. This one is very brief and it states ‘own thy own home’. What it means is that it is always better to buy a house than to rent one and that the faster one owns their home without a mortgage the better it is for their purse.
Cure Six: insure a future income. This cure states that one ought to provide in advance for their old age and for their family. These are all provisions we make for when we are no longer able to work.
Cure Seven: increase thy ability to learn. The last cure taught by Arkad to his fellowmen is about learning and improving oneself. Because only by learning people become wiser, more skilful and more able.
All seven cures for a lean purse are as useful today as they were just before the Great Depression; and probably as they were back in ancient Babylon. Most contemporary books on money and personal finance management have suggestions about how to implement these seven cures rather than come up with new ones. This is something!
And finally, the book conveys another strong message. To build wealth solidly one has to develop purpose, persistence and patience. But still one has to enjoy life – over-straining and saving too much can become too hard, life can become a burden and weaken resolve. There is no better illustration to that than Clason’s advice to all who have debts. In a nutshell it is the following:
Ten percent of all you earn should be saved and invested.
Twenty percent of all you earn should be used to pay debts – if the amount is insufficient one should negotiate with their creditors firmly and convince them that this all that they can afford but that they will pay diligently.
Seventy percent off all you earn should be used to cover all living expenses.
The genius is in working with proportions rather than absolute numbers – there is always an incentive to increase your earnings because this is the way for all amounts to go up. This also means more comfortable life, higher savings and faster debt repayment.
Do I need to say that this book is an absolute must for anyone who is discovering money? A solid basis for building financial awareness and competence!