Wednesday, June 10, 2015

Book Review: The Richest Man In Babylon Richest Man In Babylon can rightly be called a classic among financial books. Although it was written back in 1926, the book's messages are still valid today. The book is more inspirational than how-to, which is probably the reason for its staying power.

The book is written as a series of parables told by different people living in Babylon thousands of year ago. There are men struggling to save money, yearning to be like the rich of the city. One of these men asks a wealthy money lender how he obtained his wealth. The lender then tells a series of tales of money management and wealth building.

The book is an easy read of just under 200 pages and you can get through it in a day or two. Of course, it is written in old-style, biblical language, so there are lots of doth's and wouldst thou's and thou hast's all over the place, which can get to be annoying after a while. However, the overall point of the book is clear and easily comprehended. The book starts off with the Seven Cures For A Lean Purse and then goes into the Five Laws Of Gold. These are presented as if being told by the wealthy lender to his students. The second half of the book takes place a few years later and features a student recounting how he followed the advice of the lender and became wealthy himself. The parable concept breaks down occasionally, such as when attempting to discuss concepts that weren't around in Babylonian times. For instance, here is the discussion on life insurance by the rich trader Arkad:

In my mind rests a belief that some day wise-thinking men will devise a plan to insure against death whereby many men pay but a trifling sum regularly, the aggregate making a handsome sum for the family of each member who passeth to the beyond.

Arkad was quite ahead of his time, it would seem.

Nevertheless, the basic concepts Arkad teaches are simple - pay yourself first, save 10% of all you earn, pay down your debts, spend less than you earn, and invest wisely. These are basic financial tips that form the first steps of most financial improvement plans but they are often hard to implement and the stories in the book attempt to get that point across. Once you have mastered these basics, however, becoming wealthy gets much easier.

I first read this book almost 15 years ago, when I became interested in investing. It was an inspiration to me then and as I re-read it again, I still find it inspiring. The book is my standard graduation gift for people getting out of high school. I recommend it, even if you are already financially savvy.


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