Never have money worries again! What sounds like a distant dream is possible! In "The Richest Man in Babylon", George S. Clason shows you the 7 simple rules you need to follow to become rich. Follow the rules set out by Arkad, the richest man in Babylon, to never have money worries again.
Learn in this article:
How to get your finances under control
How to build wealth
How you can be rich for life
What is "The Richest Man in Babylon" about?
The quote "Pay yourself first" is attributed to George Samuel Clason, author of "The Richest Man in Babylon". After founding several companies, including the Clason Map Company - the first company to distribute road atlases in the US, he wrote several informal pamphlets in the early 20th century in which he wrote about financial freedom and entrepreneurship.
Clason's best-known work is the parable "The Richest Man in Babylon". In it, Arcad tells the story of how he rose from an impoverished scribbler to become the richest man in Babylon. He lists "7 remedies for an empty wallet" that helped him on his way to becoming rich.
The book is often referred to as a classic of personal finance advice and is therefore still extremely popular almost 100 years after its publication in 1926. Let's take a look at the 7 rules to wealth.
Rule 1 - The 10% rule
The first rule is the cornerstone of wealth and is as simple as it is difficult to implement.
Arkad teaches an egg merchant a simple but important lesson:
Arkad: "If you take one of your baskets and put ten eggs in it every morning and take nine eggs out every evening, what will happen in the end?"
Egg merchant: "The basket will overflow over time."
Arkad: "Why?"
Egg trader: "Because I put one more egg in every day than I take out."
If we use the same principle for our wallet or bank account, taking out only 90% for consumption, spending etc. and saving 10%, our account balance will grow and grow, just like the egg basket.
Arkad: "For every ten coins you put in your pocket, you only take out nine. Your wallet will immediately begin to grow and its increasing weight will feel good in your hand and bring satisfaction to your soul."
Pay yourself first: set aside 10% of every euro you receive.
Rule 2 - Control your spending
As our income grows, so do our desires. We want a bigger house, an expensive car, the latest cell phone. This is also known as lifestyle inflation. Arkad gives his students a tip that is more relevant today than ever:
"All men are burdened with more desires than they can satisfy."
Especially in the age of the internet, we are constantly shown how great others are doing because they have a bigger house, are going on an expensive vacation or have been to that delicious restaurant. We are bombarded by the minute with things that awaken our desires.
However, Arkad emphasizes that there is a difference between necessary expenses and desires and that many desires remain unfulfilled. Therefore, we need to carefully study our lifestyle habits and reduce or eliminate expenses that are not absolutely necessary.
Distinguish between necessary expenses and wishes.
Rule 3 - Increase your savings
If you follow the first two rules, you should at least soon have no more money worries. But this will not make you rich. True wealth is not measured by how much money is currently in your wallet, but how much is added to it.
You should use the 10% that you have set aside so that the money increases on its own. By investing, our capital can grow without us having to do anything.
There are many ways to invest and they have changed a lot over the millennia. ETFs can offer a good start. I personally use the broker Trade Republic and Scalable Capital, but what you invest in is up to you. Real estate, cryptocurrencies, government bonds - the list is long.
Make your money work for you by investing it. That way it will multiply on its own.
Rule 4 - Be smart and rational
By now, we are all aware that we shouldn't trust an email from a Nigerian prince. But we often allow ourselves to be seduced by other false promises. Perhaps a friend has given you a super-hot insider tip on a share or an internet guru guarantees that you will get a 25% annual return with their paid program. What sounds too-good-to-be-true usually is.
Arkad therefore teaches us that we should not be seduced by supposedly high profits and instead save small amounts first in order to learn how to protect our money.
Be smart and rational before you invest your money. Don't be guided by emotions.
Rule 5 - Distinguish between liabilities and assets
We have learned in school, movies and television that rich people drive expensive cars, live in big mansions and eat out expensively. We therefore often confuse liabilities with assets. However, the difference is actually quite simple:
Liabilities take money out of your pocket. Assets bring money into your pocket.
So is an expensive car an asset? No, the insurance, maintenance and fuel take money out of your pocket. Is a book you wrote yourself an asset? Yes, because it earns you money.
Houses are a bit more complicated. Arkad recommends owning your own home because you no longer have to pay rent. But the economic reality has changed. Put simply, whether it is financially wiser to own a home or rent varies from case to case and is often a personal decision. However, the ability to distinguish between liabilities and assets remains as important today as it was in the past.
Recognize the difference between a liability and an asset.
Rule 6 - Think about tomorrow today
It's easy to be guided by your dreams. Maybe you've always dreamed of owning a Ferrari and once you've got the money together, we're quickly tempted to spend it on that great car. But Arkad teaches us that we shouldn't just think about the here and now.
It's more important to make provisions for old age. How do you make ends meet when you're older and can no longer work? How can I leave something to my family so that it will be easier for them? This could be a property, a deposit or something else. The sixth rule is therefore:
Plan for the needs of your growing age and the protection of your family.
Rule 7 - Where there's a will, there's a way
This is perhaps the most important of the seven rules. Arkad teaches his students the power of precisely formulated wishes.
To be wealthy, we need to increase our income. But just complaining that you don't get paid enough or asking your employer for a pay rise every month is of little use. It is much more important to set yourself a concrete and realistic goal.
When we want to become "rich", we have no idea what exactly that means. Is 100,000 $ rich? 1.000.000 $ ? How do we know how close we are to our goal if we don't even know what our goal is?
But if you set yourself specific goals, for example: "I want to save 100,000 $ before I'm 35 years old", and cherish this desire, your mind will do everything necessary to achieve this goal.
One way to do this is to develop your skills in your profession. So instead of just complaining, you will look for ways to educate yourself and make yourself more valuable to your or a new employer. You will also educate and cultivate yourself to build a healthy mindset. The more we know, the more we earn. So invest in yourself too!
The most important rule is therefore:
Set yourself clear and concrete goals. Because where there's a will, there's a way.
Conclusion
Of course, if you follow these 7 rules, you won't become a millionaire overnight. Building wealth doesn't happen overnight. It's a marathon, not a sprint. Anyone who says otherwise is either incredibly lucky or lying.
But if you follow these 7 rules, you will build healthy money habits that will allow you to accumulate wealth over time. You'll have a full wallet (or modern deposit account) to look forward to in a few years. And who knows, maybe you'll be the next richest man in Babylon.
I really enjoyed the book because it presents the most important principles of wealth accumulation in a concise and simple way. I follow the rules myself and even though I am far from being the richest man in Babylon, I can feel the effects after 4 years.
If you want to find out more, you can order the book here: