rich

The Richest Man in Babylon – George Samuel Clason

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The Book in Three Sentences

Save at least 10 percent of everything you earn and do not confuse your necessary expenses with your desires. Work hard to improve your skills and ensure a future income because wealth is the result of a reliable income stream. You cannot arrive at the fullest measure of success until you crush the spirit of procrastination within you.

The Richest Man in Babylon summary

  • The 7 simple rules of money:

1) Start thy purse to fattening: save money.

2) Control thy expenditures: don’t spend more than you need.

3) Make thy gold multiply: invest wisely.

4) Guard thy treasures from loss: avoid investments that sound too good to be true.

5) Make of thy dwelling a profitable investment: own your home.

6) Ensure a future income: protect yourself with life insurance.

7) Improve thy ability to earn: strive to become wiser and more knowledgable.

  • To bring your dreams and desires to fulfillment, you must be successful with money.
  • The laws of money are like the laws of gravity: assured and unchanging.
  • Money is plentiful for those who understand the simple laws of making money.
  • Babylon was the wealthiest city in the world at the time of its height because its people appreciated the value of money.
  • You must constantly have an income that keeps your purse full.
  • “It costs nothing to ask wise advice from a good friend.”
  • It’s simple to say, but many people never achieve a serious measure of wealth because they never seek it. They never truly seek it, focus on it, and commit to it.
  • Youth often assumes, incorrectly, that the old and wise only have wisdom about days gone by.
  • You will only begin building wealth when you start to realize that a part of all the money you earn is yours to keep. That is, pay yourself first. You always pay others for goods and services. Pay yourself as much as you can. Save money.
  • You should save at least 1/10th of what you earn. More if you can afford to do so.
  • Do not take advice on finance from a brick layer. Go to people who are experts in a particular subject if you want expert advice. It’s too easy for amateurs to give out advice.
  • Build for yourself a mountain of gold first, then you can enjoy as many banquets as you wish without worry. Don’t spend your money as soon as you earn it.
  • Surround yourself with people who are familiar with money, who work with it each day, and who make lots of it.
  • Enjoy life while you are here. Do not overstrain to save.
  • Do not put your money in investments which do not pay a dividend, but also do not invest in risky places that seem too good to be true.
  • What each person calls their “necessary expenses” will always grow to match your income unless you resist that urge. Do not confuse your necessary expenses with your desires.
  • “A man’s wealth is not in the coins in his purse. It is in his income.”
  • Ensure a future income. Every person gets old. Make sure your income will continue without work.
  • Buy life insurance. Provide in advance for the protection of your family.
  • Increase your ability to earn. Improve your skills. As you perfect your craft, your ability to earn more increases.
  • The more we know, the more we may earn. The person who seeks to know more of their craft is capable of earning more.
  • You cannot arrive at the fullest measure of success until you crush the spirit of procrastination within you.
  • The 5 Laws of Gold:

1) Gold comes easily and in increasing quantity to the person who saves at least 1/10th of their earnings.

2) Gold labors diligently and multiplies for the person who finds it profitable employment.

3) Gold clings to the protection of the person who invests their gold with wise people.

4) Gold slips away from the person who invests gold into purposes through which they are not familiar.

5) Gold flees the person who tries to force it into impossible earnings.

  • If you desire to help you friend do not do so in a way that brings their burdens onto you. There are many ways to help people. You don’t have to choose the ways that restrict your time, money, energy, or ability to care for yourself.
  • The wise lender always has a guarantee of repayment should the investment go poorly.
  • Above all you should desire safety for your money. Better a little caution than a great regret.
  • Protect yourself with insurance. You cannot afford to be unprotected.
  • Do not live beyond your means.
  • No man respects himself if he does not repay his debts.
  • The soul of a free man looks at the world as a series of problems to be solved. Meanwhile, the soul of a slave whines, “What can I do?”
  • “Where the determination is, a way can be found.”
  • If you are in debt, live on 70% of what you make. Save 10% for yourself. Use the remaining 20% to repay your debts.
  • Stick with the plan. Money accrues surprisingly quickly and debts are gone fast with discipline and consistency.
  • Work attracts friends who admire your industriousness. Work attracts money and opportunity. “Hard work is the best friend I’ve ever had.”

Happy Reading.

You can buy the book from the link below

HOW TO GET RICH- RICH DAD POOR DAD

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Summary

  1. Rich Dad Poor Dad is about Robert Kiyosaki and his two dads—his real father (poor dad) and the father of his best friend (rich dad)—and the ways in which both men shaped his thoughts about money and investing.
  2. You don’t need to earn a high income to be rich.
  3. Rich people make money work for them.

Ideas

  1. The poor and the middle-class work for money. The rich have money work for them.
  2. It’s not how much money you make that matters. It’s how much money you keep.
  3. Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets.
  4. Financial aptitude is what you do with money once you make it, how you keep people from taking it from you, how to keep it longer, and how you make money work hard for you.
  5. The single most powerful asset we all have is our mind.

Lessons

Lesson 1: The Rich Don’t Work for Money

There are two main emotions which can prevent people from developing wealth: fear and desire; fear of not being able to pay monthly expenses or fear of losing money keep many entrenched in the day-to-day work, preventing many from evaluating investments and other sources of income.

The desire to keep up appearances via buying expensive clothes or cars drives expenses so high that people have no choice but to stay focused on their jobs to maintain their lifestyle. Lesson one is all about understanding those two emotions and stopping them from hindering one’s success. The Rich Dad was more focused on ways of creating residual money, money that increases even if you don’t work, rather than waiting for the next job with a pay raise

Lesson 2: Why Teach Financial Literacy?

Developing financial literacy is key to having any success with money. Financial literacy is simply the study of managing one’s finances. Robert Kiyosaki breaks down the basics of financial literacy in order to show the differences in cash flow for different income levels.

There are a few key terms one would need to understand in order to see differences. Income is simply the amount of money you earn (wages, salaries, etc.). Expenses are things like (taxes, food, rent, clothes, fun, and transportation). An asset is something that puts money into your pocket (stocks, bonds, investments). A liability is anything that takes money out of your pocket (home mortgages, loans, credit card debts.)

To put it simply, the rich are able to live well off of the returns from their investments such as stocks and bonds covering any expenses. While a poor person is using the majority of his wages to pay for his prospective living expenses. In order to become wealthy, one must focus on increasing his assets (investments) rather than focusing on increasing his income (pay raises).

Lesson 3: Mind Your Own Business

As mentioned in the previous lesson, the key attribute that must be developed in order to gain wealth is to focus on your asset column. The rich focus on improving the size of their investments rather than simply waiting or demanding pay raises in their income.
This means keep your expenses low, reduce your liabilities and diligently build a base of solid assets.

Lesson 4: The History of Taxes and The Power of Corporations

This is the power of limited liability. By creating a personal corporation, the rich are able to avoid many of the personal taxes the poor face through corporate exemption. However, please note the word avoidance compared to evasion! Avoidance simply means using loopholes in tax laws to your advantage where evasion is simply not paying taxes at all, which is illegal.

By filing as a corporation, the rich are able to mitigate their losses to only the amount they invested in the corporation. They are able to pay taxes after they pay for expenses. For people who have jobs, it’s the opposite case where taxes are taken out of paychecks before one is able to cover expenses.

In Comparison:

The Rich People with Corporations
1.    Earn
2.    Spend
3.    Pay Taxes

The People who work for Corporations
1.    Earn
2.    Pay Taxes
3.    Spend

Lesson 5: The Rich Invent Money

The idea behind this is that wealth takes a combination of financial intelligence and a little bit of guts. The one thing that holds a lot of people back is some degree of self-doubt. In order to gain wealth, there needs to be a degree of self-confidence. This means investing money outside of the comfort zone. While saving at the bank seems secure, it is not worthwhile because savings rates are often below the rate of inflation. As a Young Jeezy rap lyric once goes, “Scared money don’t make money.” Kiyosaki follows the same logic, if you truly want to see your investments grow exponentially you must be willing to put in the money in places that show relative risk.

Lesson 6: Work to Learn—Don’t Work for Money

A familiar acronym for job is just over broke. Oftentimes, it’s easy to get caught up in a job as a means of security or money. However, the rich use jobs as learning opportunities to develop necessary skills to be successful.

“According to Kiyosaki, real assets fall into the following categories:

  1. Stocks
  2. Bonds
  3. Income-generating real estate
  4. Notes (IOUs)
  5. Royalties from intellectual property such as music, scripts, and patents
  6. Anything else that has value, produces income or appreciates, and has a ready market”

“Kiyosaki reminds people that financial IQ is made up of knowledge from four broad areas of expertise:         

  1. Accounting
  2. Investing
  3. Understanding markets
  4. The law”

“The main management skills needed for success are:

  1. Management of cash flow
  2. Management of systems
  3. Management of people”

“There are five main reasons why financially literate people may still not develop abundant asset columns that could produce a large cash flow. The five reasons are:

  1. Fear
  2. Cynicism
  3. Laziness
  4. Bad habits
  5. Arrogance”

“In the world of accounting, there are three different types of income:         

  1. Ordinary earned
  2. Portfolio
  3. Passive”

FINAL THOUGHTS

This is a great read especially for the ones new in the field of business or investing. In the initial chapters it starts with the basic difference between the assets and liability which is quite different from the one taught in schools. One criticism which the book has is its focus on real estate which is far more difficult for a beginner investor then explained in the books. I’d recommend this book as an excellent way to challenge your thinking about work and money, but only if you combine it with other books that make tactical recommendations of financial issues because this book doesn’t have many actionable suggestions. I will recommend some other books in the coming articles.

You can buy the books from the link below.