August, 2009:

This is the third in a series of articles reviewing the lessons found in the definitive classic, The Richest Man in Babylon by George S. Clason.  If you’d like to start at the very beginning (a very good place to start!) – you can find the first article here.

Meet the Goddess of Good Luck

In this section of the book, Arkad is asked by a student about how to attract good luck.  It is noted that men may work side-by-side with one another, and one may have good luck while another does not.

The students are questioned about times when they had experienced good fortune to perhaps find out the way that good luck came upon them.  One man found a wallet full of money – but could not reckon how to continue finding more wallets.  Another noted that Arkad himself had been seen at the horse races, betting on the grays.  Alas, Arkad pointed out that gaming houses and horse races, while frequent locales for witnessing the good fortune of a few, the odds are always in favor of the organizers, and good luck does not flow to the game players.

Finally, a livestock trader speaks up about a time when he allowed good fortune to slip through his hands.  It seems that he had an opportunity to purchase a flock late one night, when the owner of the flock was anxious to complete the sale and return to his home.  By delaying the purchase until morning, more buyers were on the scene who were willing to pay a much higher price than was originally offered, and so the good fortune slipped by.  By procrastinating his decision, the buyer lost out on a fine profit.

At this, another fellow, a trader, pointed out that he had been subjected to his own procrastination early in his career.  By finally recognizing it and working against the urge to delay, he was able to cause much good fortune to come his way.  By taking action, even in some small way, toward making a decision, the trader accounted that his fortunes had changed to the better.

Lesson:  A man of action is favored by the goddess of good luck.  Procrastination upon decision-making only leads to regrets.  Make decisions with all the good information that you have – either for or against an action – and carry out the decision.  Indecisiveness does not bring good fortune.

The next chapter is “The Five Laws of Gold“.

Photo by Tie Guy II

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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“.

Photo by lepiaf.geo

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I’m off on vacation this week, and my vacation is usually quite literal:  I simply vacate.  I’m not much of one for taking in the world’s largest ball of twine, or dumping more money into a mouse’s accounts at an amusement park… we usually just make it to the beach and do little to nothing for a week.

But little to nothing is hard to sustain for very long, and I generally read quite a lot.  This week I’m re-re-reading a classic, George S. Clason’s The Richest Man in Babylon.  It made me think about a project that I’d been wanting to do, which was to give a review of the lessons in the book – not a book review, mind you, but going through each of the lessons in the book in it’s entirety.  I’m sure I won’t get all of this completed in the week, but will get a start on it here.

What’s very interesting about this book is that the lessons aren’t anything new.  Perhaps it’s fanciful to assume that these very conversations were being had in ancient Babylon, but the basic lessons have been around for ages.  Yes, there may be new tax legislation all the time, and from time to time a groundbreaking product may take the stage, but all in all the way to gather and maintain wealth is unchanged throughout the centuries…

The first installment of these lessons takes place in the the first two chapters:  The Man Who Desired Gold, and The Richest Man in Babylon.

The Man Who Desired Gold

This first chapter sets the stage for the rest of the book; we are introduced to a chariotmaker, Bansir, and his friend Kobbi, a lyre-player.  These two fellows are talking together as modern-day friends might, commiserating about their shared plight.  Each man has spent his entire life working, working, working, but they have nothing to show for it.  Kobbi finds Bansir sitting on a wall daydreaming, rather than finishing the chariot that is half-made in his workshop.  He asks Bansir for a loan, since it appears that he must have plenty of money for his lack of industry.

Bansir tells his friend of his dream, where he had all the money he desired, enough to spend on everything his heart wanted.  But he awoke, and found himself in his dire condition, living hand-to-mouth, with no savings, and no investments to provide him with an income.

Sharing the dream, both men wonder aloud how it is that some people eventually move beyond the situation that they find themselves in.  They’ve hoped that hard work alone would be enough to magically transform their lives to ones of leisure.  (to borrow a phrase “So how’s that working for you?”)

As they talk they come to the realization that most men are born into similar circumstances – they even observe a line of slaves being driven to work carrying water to the king’s gardens, noting that they could just as easily have traded fortunes with any one of them.  Likewise, they discuss the great fortune of their old friend Arkad, who is known as the richest man in Babylon.  How is it that Arkad has such a great fortune, yet they have nothing at all?

Together, they finally decide that the way to learn how to provide themselves with a fortune is to talk with their friend, Arkad, the rich merchant.

Lesson:  To start yourself on the way to riches, it is important to learn from others who have experience in acquiring riches.

The Richest Man in Babylon

So Bansir and Kobbi, among other friends in similar situations, ask their friend Arkad, the richest man in Babylon, to share the secret of his great fortune.  In answer, Arkad shares his story…

As a young man Arkad was in the same boat as Bansir, Kobbi and the others – working, working, working, and never getting anywhere financially.  Through his job he became acquainted with a money lender, Algamash, who Arkad decides to ask the same question being asked of him now – how to become a rich man.

Algamash provides Arkad with the first lesson:  part of all you earn is yours to keep. This is that age-old saying that we’ve all heard often – Pay yourself first.  It’s simple enough, but if you don’t put it into practice you won’t know the vast benefit of such a habit.  As Arkad learned, paying oneself a tenth of everything he earns teaches a man to live just as well with the remaining 90%.

Later on, as Arkad has gotten into the habit of putting away that tenth… we learn the second lesson.  Arkad built up a bit of money and decided to take the advice of his friend the bricklayer, to invest in some gemstones.  Algamash points out the folly of taking advice from a bricklayer about gemstones, as Arkad learns by losing all of his savings.  Lesson two from Algamash: take advice only from those that are experienced in the matter of your questions.

After a time, Algamash returned again to check on Arkad.  He had learned from his mistake and invested on the advice of business men who dealt in the goods, and earned nice dividends.  When asked what he had done with the earnings from his savings, Arkad proudly told Algamash of the feast he had given, the clothing he had purchased for his wife, and his plans to buy a donkey for himself to ride upon.  At this news Algamash admonished Arkad – if you take the children of your gold and make the children produce children, you’ll enjoy many a rich banquet without regret.  The third lesson: take advantage of compounding of returns.

In our next installment, we’ll look at the next chapter -  Seven Cures for a Lean Purse.

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