This is the second in a series of posts in review of the lessons found in the book The Richest Man in Babylon. The first article can be found here.
Seven Cures for a Lean Purse
Arkad, the richest man in all of Babylon, has been persuaded by the king to teach others the secrets of his wealth. The king wants all of his subjects to know how to acquire wealth, as he wishes for Babylon to be known as the wealthiest city in the world. In this chapter, Arkad lays out the cures for a lean purse over the course of seven succeeding nights.
The First Cure: Start Thy Purse to Fattening
As was instructed in the earlier article, Arkad recognizes the great benefit of paying oneself first out of all income. The recommended amount is not less than one tenth of all earnings. Even though we covered this lesson in the first article, it’s value cannot be underestimated. This particular lesson is revisited over and over throughout the book.
In these times when many folks are nearing retirement with much smaller balances than they had before the market volatility of last fall and winter, the best way known to make up the differential is to put more money aside. Many consider the benefit of taking larger risks with what remains of their savings, or somehow reducing their future expenditures, but the best (and really only, in most cases) way to get back on track is to continue regularly saving – and likely delaying retirement by a year or two from the original plan.
The Second Cure: Control Thy Expenditures
Once you’ve begun setting aside ten percent of your earnings, you must learn to get by on only ninety percent, and the lesson here is to get by with even less, if possible. Arkad explains that “what each of us calls ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary’.
This again is a long-held truth, that if we do not examine our outlays we will always find a place to spend every last cent of our income. It is for this reason that it is often helpful to, upon receiving an increase in salary, begin by setting aside the amount of the increase into savings. After all – we were able to “get by” on the amount before, right? And if we have been overspending our salaries, we must split those expenses out into “necessary” and “wants”. Your “wants” can be had later when you’ve become wealthy. Remember, patience is a virtue.
The Third Cure: Make Thy Gold Multiply
As we set aside the prescribed ten percent of our earnings, it is important to start that money working for you, increasing your savings. Of course there are many ways to invest your savings, but it is wise to invest in ventures that are assured of return. Compounding this return upon itself causes your multiplying savings to increase at an ever-quicker pace.
The Fourth Cure: Guard Thy Treasures From Loss
When you have savings built up, there are many ventures that will come into your sights – some promising outrageous returns, others a fair return. As you consider your alternatives, make certain that the advice you utilize with regard to how beneficial a venture might be comes from others who know and understand the venture. Otherwise, there are plenty of ways to invest your money in unwise investments – with little chance for return, and a great opportunity for loss.
The Fifth Cure: Make of Thy Dwelling a Profitable Investment
In this lesson, Arkad points out the benefit to be had by owning one’s own home. Instead of paying rent throughout the years and having nothing to show for it but a box of rent receipts, it is wise to pay roughly the same amount as your rent toward a mortgage and eventually have a paid-for home of your own.
Arkad also points out the spiritual benefits of owning a home – where your family can enjoy a yard and perhaps a garden, and how owning property in and of itself does good to a man’s heart.
The Sixth Cure: Insure a Future Income
This is the lesson concerning retirement and disability income planning – or in Arkad’s words, “it behooves a man to make preparation 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.”
First suggested is to bury some money in the sand – of course this doesn’t do the trick. Then Arkad suggests putting money aside with the money lender, and adding to it regularly, receiving rental (interest) for the loan. In time, the compounded interest and regular contributions will amount to a sizeable sum from which you can draw in old age or your family could use if you were not with them any longer.
Obviously, life and disability income insurance would be a benefit available today to cover the latter, and retirement savings accounts, pensions, and annuities are available to cover the retirement income. Otherwise, the “cure” is the same.
The Seventh Cure: Increase Thy Ability to Earn
This last of the cures speaks to a way to increase the benefits of the other six: If you can increase your ability to earn, you can readily set aside more of your income in building wealth. The way to do this is twofold… begin with industriousness and desire to earn more. This attitude will serve you well in current avocations. Working hard and taking pride in what we do doesn’t go unnoticed.
At the same time, improving your skillset and knowledge of your profession will open doors of opportunity for increasing earnings.
In closing, Arkad’s summary of the cures:
Many things come to make a man’s life rich with gainful experiences. Such things as the following, a man must do if he respects himself:
He must pay his debts with all the promptness within his power, not purchasing that for which he is unable to pay.
He must take care of his family that they may think and speak well of him.
He must make a will of record that, in case the Gods call him, proper and honorable division of his property be accomplished.
He must have compassion upon those who are injured and smitten by misfortune and aid them within reasonable limits. He must do deeds of thoughtfulness to those dear to them.
And lastly, to cultivate thy own powers, to study and become wiser, to become more skillful, to so act as to respect thyself.
The next article will deal with the chapter “Meet The Goddess of Good Luck“.
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