The Richest Man In Babylon || Book Review || 5 Key Lessons
4000 years ago, in ancient Mesopotamia, along
the Euphrates River in present-day Iraq, existed
one of the most glamorous cities of the ancient
world, called Babylon. It is said that this
city had no natural resources like forests
or mines, and it had insufficient rain to
raise crops. Yet, it was one of the richest
cities in history. And that was because of
the engineering feats, wisdom, and wealth
management abilities of the people living
in Babylon.
They were educated people, and it is said
that they were the first known doctors, engineers,
or financiers. They didn’t have paper but
inscribed their wisdom on clay tablets. The
city had marvelous architecture and the inhabitants
lived a prosperous life in Babylon protected
by massive walls. All these make it difficult
to believe such a developed city existed so
many centuries ago.
But around 2500 years ago, Babylon was attacked
and conquered by the enemy. From then, the
city lost its power and prosperity, and people
abandoned it. Babylon, once the wealthiest
city, became lonely and forgotten. Until the
beginning of the 20th century, when a German
archaeologist discovered its foundations,
excavated and recovered the clay tablets of
that period. Babylon fell and became a deserted
ruin, but the wisdom of Babylon remains
Hello everyone, my name is Saurav, and I welcome
you to Expords. Today I am going to talk about
this book- The Richest Man in Babylon and
share 5 key lessons from it
This book is written by George S. Clason in
the year 1926 and shares some simple yet powerful
financial lessons through the stories of Babylon,
which we talked about in the introduction.
The author says that the financial lessons
were inscribed on the clay tablets excavated
from the ruins of Babylon.
This is an excellent book on personal finance
that is recommended for learning wealth management.
And whatever you want to be in life, you need
to know how to manage money so that you have
enough of it. Because ultimately, that s what
we all want.
Lessons in this book are no rocket science
or Engineering Mechanics, whichever is difficult
for you
You may already know a few of the concepts
in this book, but still, it is worth reading
because it has many other valuable lessons.
This would help you if you don t know anything
about wealth management. I fell in the same
category. Just one year ago I didn’t t know
there is any such thing as personal finance.
I believed that you earn money and just save
it in your bank account. That s all.
Luckily personal finance is much more than
that, and thanks to books like Rich Dad Poor
Dad and The Richest Man in Babylon, which
have helped me understand some basics of personal
finance. Before I share with you the lessons
from this book, I must tell you I am not a
financial expert, I am just sharing what I
have learned
So, let s begin with the first lesson
The first lesson is,
Pay yourself first
What does it mean?
Okay for answering that let s first consider
these two equations.
Savings= Income Expanses
Expanses= Income Savings
Is there any difference between these two?
Mathematically, there is no difference; they
are just rearranged. But, in terms of personal
finance, the difference between these two
makes all the difference.
The first equation says that you should spend
your money first and then save what is left.
So, it prioritizes the expenses more than
the savings.
In contrast, the second equation says that
you should save first and then spend what
is left. And it prioritizes the savings more
than the expenses.
The book says you should follow the second
equation. That is first save money for yourself
and then spend the rest.
But how much should you save? There is no
exact number for that. But it should be a
minimum of 10% of what you earn. So, if you
are earning Rs. 50,000 per month, then save
at least 10% of it, i.e., Rs. 5,000. This
is just the minimum amount, if your expenses
are low, you can certainly save more.
And you have to do it every month, earn, save,
and then spend from what is left.
The second lesson is
Control your expenses
The Richest Man in Babylon says, almost every
one of us is not satisfied with the money
we earn. If we make Rs. 30,000 per month,
we would feel a lack of money, and if somehow
our income increases to Rs. 5,00,000 per month,
we would feel the same lack of money.
It happens because when our income increases,
our expenses also increase. When our income
is low, we drive only the motorcycle, travel
in economy class flights, and live an average
life. But when our income increases, we buy
cars, travel in business class flights, buy
costly gadgets, expensive clothes, and all
these become our lifestyle.
Dave Ramsey, an American personal finance
personality, says, Unless you control your
money, making more won’t help. You’ll just
have bigger payments.
So, The more we earn, the more we spend, and
the more we get used to it.
But if you want to lower your expenses, and
save money, you can differentiate your expenses
based on your needs and desires
Needs are the necessary expenses like buying
food, paying bills, or spending on education.
Whereas the desires are primarily for entertainment
purposes, like Netflix subscriptions or partying.
So, if you want to save more money, you need
to spend only on your needs and not on your
desires.
The third lesson is
Make money work for you
Now that you are saving at least 10% of what
you are earning every month, you can t simply
save that money in your bank account. So,
what to do with it?
The Richest Man in Babylon says, instead of
spending your savings on unnecessary things
like expensive electronic gadgets, or cars
you should spend it on assets like stocks,
mutual funds, real estate, etc.
In this way, money works to make more money
for you, which you should reinvest. The process
continues, you get compound interest, and
your assets can be a steady source of income.
This may not be as simple as it sounds; you
need to learn how to invest and train yourself
to be more patient.
Moving towards the fourth lesson, which is
Luck favors those who take action
I will tell you a story from the book. It’s the story of a merchant living in Babylon;
let’s call him Pappu. So, Pappu was married
and earning well from his work. Everything
was smooth. Pappu, invest in the land.
Please don’t underestimate Pappu, an entire
Wikipedia page is dedicated to this name.
One day, Pappu s father came to him and told
him about an investment. There was a barren
land where canal water couldn’t reach. Pappu’s
father knew a person who wanted to buy that
barren land, build large waterwheels driven
by oxen, and bring water to that land to make
it fertile.
Once it became fertile, he was planning to
sell it to the city residents at high prices.
But he didn’t have money to buy the land,
so he was looking for some people who could
invest and be a partner.
Pappu’s father wanted him to invest in that
barren land. But Pappu didn’t take it seriously
and used his savings to fulfill his desires
and enjoyed his life with his wife.
He completely procrastinated the decision
to invest, and someone else invested in it.
After a few months, he got to know that the
barren land project became immensely profitable,
and investors earned more than anyone had
thought.
So, what does the story say? Good luck comes
to those who accept the opportunity and take
action at the right time. Now, of course,
it doesn’t mean accepting every opportunity
and investing everywhere, but what it means
is investing only after studying it well.
-Virgil, an ancient Roman poet, said, Fortune
sides with him who dares.
So, those who would analyze the opportunity,
take the risk, and accept it, only those have
a higher chance of being lucky.
The fifth and the final lesson is
Improve your skills
There will be times when we may lose everything
we have earned- our money, house, car, reputation,
etc. But the only thing which we will never
lose is our skills. Skills and experiences
are valuable because they will always be there
to help us.
The book says that you should work on yourself
to improve your skills and learn more about
your profession. And in this globally competitive
information economy, where everything is continuously
changing, improving your skill is not a requirement
but a necessity.
Stephen R. Covey, author of the 7 habits of
highly effective people said, Unless you’re
continually improving your skills, you’re
quickly becoming irrelevant.
So, whatever you are, try to be better at
it. If you are a computer programmer, learn
a new programming language; if you are a writer,
attend a writing course. If you are a salesman,
read books about how to sell better.
The better you become at your profession,
the more money you will earn. Investing your
time and money in improving yourself is essential
because you are your greatest investment.
These were the five key lessons that I have
learned from The Richest Man in Babylon. I
hope it helped you. I would recommend this
book to everyone who wants to learn wealth
management as this has got some effective
practical lessons. Thanks for watching and
making it to the end. Meet you in the next
video, Till then bye-bye and take care.
