Richest Man In Babylon: 7 Cures for a Lean Purse

Is it possible that you wear expensive branded clothing, visit expensive restaurants, live in expensive houses and spend a lot of money on various stuff but your wealth doesn’t decline? Instead, your wealth just keeps on increasing every year?

Yes! It’s possible. Let’s find out.

5000 years ago, in a city named Babylon, there lived a man named Arkad who was really rich. Like every other rich man he wore expensive clothes, ate lavish food and owned expensive things. And he would spend extravagantly on his family too.

Despite all that, every year his wealth would just keep on growing. His wealth would grow more rapidly than his spending.

Now this might leave you wondering what was he doing that despite spending so much his wealth never lessened/decreased. His friends had wondered the same.

A few of his old friends happened to come to see him. They said “You are the richest man in Babylon who can afford to buy his family expensive clothes and lavish food. But they are unable to do the same. We grew up together, attending the same school and playing the same games. It’s not like you were better than anyone else, or that you worked harder than anyone else. But it’s unfair that you get to enjoy all of that because of your good fortune while we don’t.”

To which he replied that good luck isn’t always good to you/Luck doesn’t favor you. Everyone who’s earned their fortune through chance or fate was eventually ruined.

Nassim Taleb quotes, “What comes by luck, often goes away by bad luck. Often suddenly.”

What happens by chance, such as people who win lotteries, gets them millions right away, but the millions often disappear right away as well. And the proof lies in the lives of these winners. According to research, 70% of the lottery winners lose all their money within 10 years of winning it. Despite winning millions, it takes the winner 5-10 years to get back to where he was.

Arkad tells them about his life, saying that he has never had any luck and that everything he has today is the result of his hard work. His story begins years ago when he met Algamish, the money lender. 

Algamish taught Arkad an important money-rule.

“Every gold piece you save is a slave to work for you. Every copper it earns is its child that also can earn for you. If you would become wealthy, then what you save must earn, and its children must earn, that all may help to give to you the abundance you crave.” 

The quote is pretty self-explanatory, but let’s look into what it means.  

For every rupee you save and invest for the long run, it becomes your slave for life.

And the slave earns money for you through the power of compounding. The money that the slave earns for you let us refer to them as slave children also become a slave to you. 

Every rupee you spend goes away from your hand forever.

Arkad then told his friends that he had learned 7 money management rules throughout his life, which he still follows today. 

Arkad’s friends were eager to learn what the rules were and begged him to tell them. 

To which Arkad revealed to them what those 

Seven Cures for a Lean Purse were. These principles are fundamental and timeless, and thousands of years ago, rich men used them to live a luxurious life. 

The rich would tell their children about the seven cures, and the children would tell their children, and so on, resulting in the rich remaining rich and the poor remaining poor.

But that was years ago, and it no longer applies today. We have YouTube, after all. And a fantastic channel “Invest Mindset” where my goal is to erase all financial stressors from your life. So, if you haven’t subscribed to the channel yet please make sure that you do.

So, let’s see what the 7 secrets of becoming rich are: 

Seven Cures for a Lean Purse

The First Rule:

Start thy purse to fattening. In simpler words, pay yourself first. 

Arkad enlightened his friends that his path to wealth began when he discovered that a part of his salary could be his. His friends were perplexed and asked, “Isn’t your entire salary yours?” Arkad responded, “How is that?” “Don’t we pay the laundryman a part of your salary? Don’t we pay rent to our house owner? Don’t we pay for our food? How much money do you have for yourself after paying all of them? To be honest, your salary is more of theirs instead of your own”

And if you keep on paying others before you pay yourself you’d be no one but a slave to them. 

So to begin your journey of becoming wealthy the first thing you do is whenever you earn 10 coins, you take out 9 coins for your expenses and leave one coin in your purse in order to save it. If you leave a coin to save in your purse for 12 months by the end of the year you will have saved 12 coins and your purse would be heavy from the weight of the 12 coins. And let’s be honest, a heavy purse filled with coins is far more satisfying than the weight of an empty purse.

The Second Rule:

Control thy expenditures. (Telling your money where to go instead of wondering where it went)

The moment Arkad mentioned the first rule, everyone began complaining about how they didn’t have enough money to cover their daily expenses, saving is a long way off. Arkad asked them a question that made them think hard. 

He asked how many of them had no money in their banks at the end of the month. Everyone put up their hands.Arkad then told them that everyone has different salaries, with some earning more than others and others earning less. How come everyone is out of money by the end of the month? At least people earning more than others should have a couple of bucks left, right? That left everyone in deep thought. 

They realised that as salary increases, so do expenses. Arkad went on to say that people often confuse their desires with necessities. Things that seem necessary to them are actually just a desire. So, it is important to understand the difference between your desires and your necessities. (People don’t understand the difference between their “needs” and their “wants”)

So, let’s say you earn 10 coins every month. (Instead of assuming that you earn 10 coins assume that you earn 9 coins only.) Hide one coin away from 10 coins and assume that 9 coins is how much you earn. So, you will save one coin every month and as a result you will save 12 coins a year. 

The Third Rule:

Make thy gold multiply  (Invest to multiply wealth)

After following the two rules above i.e saving and controlling your expenditures the next step is to multiplying your money. 

Majority of people fail miserably at this. Or, they don’t pay much attention to this step. 

You have successfully saved your 12 coins. The next step is to put these coins to work. Let these coins work for you. 

The first time Arkad started saving a couple of coins. Since he wanted to invest the money in order to multiply it, he lent those coins to a shield maker. And every fourth month the shield maker would pay an interest to Arkad for the loan. Then Arkad would invest the interest money again and the interest money would again give Arkad more interest money and so on…..till the point where all his investments were making money for him which started to make his wealth grow. 

When Arkad began his journey to financial freedom, his destination seemed far away, but once he started moving towards his destination, it didn’t seem so far after all. It may have seemed difficult and faraway at first, but once you begin working towards it, you will be closer to your goal much sooner than you expected. Because the power of compounding is with you every step of the way.

The Fourth Rule:

“Guard thy treasures from loss” 

The next step that Arkad explains is that bad luck or misfortune can strike anyone at any time. In most cases, taking on huge risks yields huge returns, but huge risks can also yield huge losses. So, the first rule when it comes to investing is  “security of your principal.” . You must secure your money. 

Warren Buffet, the most successful and richest investor of the world, quotes “Rule no. 1 of investing is don’t lose money. And rule no. 2 is don’t forget rule no. 1”

Because when you lose your money, you lose not only that money, but also all the potential money you could have made with it. 

Arkad says, “Guard thy treasure from loss by investing only where thy principal is safe,” 

Invest your money only where you know it will be safe. 

If you’re unsure about where to invest your money, seek advice from someone who fully understands money and investing.

As the saying goes,  “BETTER A LITTLE CAUTION THAN A GREAT REGRET”  

It is better to be careful with your investments than to regret not being cautious. 

The lesson that we can derive from this is that money should always be invested with caution. You should keep striving for higher returns, but your primary  focus should be to avoid loss at all costs.  

The Fifth Rule:

Make of thy dwelling a profitable investment. (Buy a home in the right location)

Arkad tried to explain how owning a house of your own is preferable than renting a house. Buying a house of your own can also be a profitable investment because house prices rise over time. Additionally, since you own a house of your own you don’t have to pay the rent. And the money that you save on rent is yours to invest.  

Although I have a different opinion on this, which we’ll discuss at a later date. 

The Sixth Rule:

“Insure a future income” (Convert your earned income into assets that can create passive incomes)

The next day, Arkad discusses how everyone knows the stages of life i.e from childhood to adulthood to old age. Arkad further continued that when a person is incapable to work in old age, he must have a secure future income in order to avoid all financial stressors.

The Seventh Rule:

“Increase thy ability to earn. ” (Invest in yourself, it pays the highest return).

On the seventh day, Arkad informs his friends that he is going to be telling them the most important lesson of their lives. He starts by narrating a story about a young boy who requested Arkad to lend him some money. When asked what he needs the money for, the boy replies that his salary is insufficient to cover his family’s basic expenses. Arkad refused to loan him the money and confronted the boy, saying that he neither had a solid income, nor did he have any savings so even if Arkad lends him money, the boy won’t be able to repay Arkad. After all, why would any reasonable person lend money to someone  who is unlikely to repay it?

So, Arkad advises him to concentrate on enhancing his wealth rather than making loans. To which the young boy simply responded that he had made efforts to persuade his boss to raise his pay, but in vain. Arkad replied by telling him that the boy possesses one of the two traits required to become wealthy. He possesses the first trait, a strong desire to become wealthy, but he lacks the second trait, skill. No one will be willing to pay you more if you have little or no skill. 

Arkad then informs his friends that many people expect a higher income.  On the other hand, they never pay attention to and fail to recognize their own abilities. They don’t give importance to what their boss gets in return for a higher salary in terms of value?

The more skilled and knowledgeable a person is, the more value he brings to the company, and thus the higher his salary is. So, whatever you do, do it passionately and never put off learning new skills, as this will boost your value in the company. 

And you won’t have to request your boss for a raise; instead, if you make meaningful contributions,  he will naturally raise your pay. 

300 years ago, a powerful figure stated “ The best investment you can make is in yourself. Because the investment in your knowledge pays the highest dividend.”

Many people invest 500 bucks on a self-help book that turns out to be life-changing. With that little 500 bucks investment, their lives take a completely different turn. You should definitely read RICHEST MAN IN BABYLON if you haven’t already.  It’s a short and interesting book that teaches you the most important money principles. 

 

One comment

  1. Legit after a year…

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