On of my favorite books about money and investing is George S. Clason’s The Richest Man in Babylon. 

In addition to its catchy title, this book is unique because Clason wrote it in the 1920’s.  You might find it hard to believe that a book written almost a century ago would have any relevance today.  The surprising truth is that it does have relevance.  The Richest Man in Babylon covers basic universal lessons about money.   The investment vehicles available today might be different from the opportunities that existed 50 or 100 years ago.  The best stocks might be different; real estate is a whole different animal; and starting a business represents an entirely different process. 

But basic concepts about money and investing are timeless.  They apply in all sorts of scenarios.  Clason writes a set of parables that explains these concepts in an engaging, narrative style.  In those parables, we learn how the leaders of ancient Babylon became rich. 

Everyone from the young high school kid to the most experienced investor should read this book.  It is a short read, and you can probably get through it in a few hours on a lazy Saturday afternoon.

Simple Lessons

The parables in the book address simple lessons about money and investing that resonate very strongly and transcend time altogether.  The first parable, for example, is called “Start Thy Purse to Fattening.”  Its principal message is that a part of what you earn is yours to keep.  A money lender, Algamish, asks the main character, Arkad, “If you . . . keep for yourself one-tenth of all you earn, how much would you have in 10 years?”

When I first read that question, my mind exploded with possibilities.  I mentioned on Wednesday in my post about not trying to be like everyone else that people frequently complain that they don’t have any money to invest or to use to try to achieve some level of wealth.  The truth, however, is that they have plenty of money at their disposal–i.e., their income.  The problem is that they spend all of their income (and sometimes more) and have nothing left over.  Imagine if you saved 10% of your paycheck for a few years.  If your salary is $50,000, you’d save $5,000 in one year.  If your salary is $75,000, you’d save $7,500.  If your salary is $100,000, you’d save $10,000.  All that is required is that you live on just a fraction less than what you make (about 10% less).  Over a couple of years, those savings add up.  After just one year, $5,000 would be a sufficient sum of money to start an online business.  And you can buy a significant amount of silver with $7,500.  You get the picture.  With lessons like these, this book helps you believe that you have the money–and the power–to achieve wealth. 

Investing

The book also focuses on investing in general.  It acknowledges that income alone doesn’t make us rich.  Instead, the book offers general principles about investing that are as relevant today as they were in the 1920’s.  As I stated above, the opportunities for investing may have changed over the years, but the wisdom and principles of investing never change.  This book encapsulates those ideas and illustrates that taking our money and investing it is the key to becoming rich.

Financial Education

A larger point about this book is that achieving wealth and becoming rich are all about education.  People tend to think that the way to become rich is to find some get-rich-quick scheme or some stock with huge future potential.  But jumping into any investment (particularly any get-rich-quick scheme) isn’t smart.  We should never invest in anything without knowing as much as possible about that opportunity.  In The Richest Man in Babylon, Clason gives us the tools necessary to evaluate opportunities around us and make our own judgments.  Reading about and applying these timeless tools increases our financial education.  That, in turn, helps us evaluate investment opportunities comprehensively, and it lessens the risk associated with the opportunities we’ve investigated.  Knowledge is the key to success, and Clason provides us with a bundle of it.

If you have some time this weekend, I highly recommend buying and reading this book.  (There is now a revised edition: The Richest Man in Babylon: Now Revised and Updated for the 21st Century.)  It is essential if you are determined to achieve financial independence through investing.

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