Welcome, Welcome everyone. It is time for another Lessons Learned episode, where I highlight one of the books that has made tremendous impact in my personal life in a pretty major way. As you already know, at Winners’ Ways, our goal is to empower you to win.
Today, I am excited to share with you my “5 Key Takeaways from the richest man in Babylon”. A book written by George Clason.
If you know me very well, you will know that I enjoy reading a lot. I read mostly non-fiction books and I focus mainly on four areas. I read other books from time to time – such as books on politics, engineering and technology books, but my five-main area of interests are:
- Career & Business
- Personal Finance
I think everyone ought to be readers. I truly believe that readers are leaders because you can gain incredible amount of information and knowledge that can help you in any specific area of your life. Through book you can gain new perspectives and learn from people who are more experiences than yourself. Indeed, book is crucial for your personal growth and development.
It is on this note that I will be starting a new tradition whereby I will be revealing my reading list to you – the listener. The goal of this is to find more ways of serving my audience and help them to succeed at what they do.
Anyway, before I get too carried away with my love for book, let’s get back to today’s episode is not about my reading list, I just thought I should throw that out. Hopefully, depending on my schedule, next episode may likely focus on my “Summer reading list”. Fingers crossed.
Today’s book happens to be in the personal finance category, and the motivation behind this was from one of the article that I recently published on “Five Awesome Ways to save more money”. Based on the feedback and comments that I received on the article, I realized that the subject of money management is very important to many people, and I think we can all learn a thing or two from this great book.
First let me set the scene for you. The richest man in Babylon was first published in 1926 and has since been revised several times thereafter. The book was about the richest man – Arkad in the ancient Babylon. Arkad was not only rich, but also very generous. Everyone in Babylon knew and respected him. In Babylon then, most other people are struggling to make ends meet, but the few rich ones were getting richer, similar to what we have in our society today.
Rather than getting jealous of the few rich people, the Babylonian people went to their King with their concerns, and after some deliberations, they decided to consult with Arkad, the richest man. Arkad then launched into series of teaching that basically show people how to build wealth, and that lesson from the richest man in Babylon is what I will be sharing with you today.
Before we get into the lessons, I have some questions to ask you:
- Are you satisfied with the way you currently manage your money?
- Are you confident that you can retire comfortably someday?
If you have answered “No” to any of those questions, then this lesson is for you. Please refer to my show note and print a copy so that you can have the lessons handy.
Without further ado, let’s take a deep dive into my 5 key lessons from the richest man in Babylon.
- Pay yourself first: Take one-tenth of what you bring in and save it for the future. You must decide that a part of all you earned is for you to keep. No one can accumulate wealth without saving what they earn.
For example, if you earn $1,000 every month, you must ensure that you keep $100 for yourself and plan your budget around the remaining $900.
TAKEAWAY: The goal of saving one tenth of your income is for you to be able to find good form of investment where you can put the money.
In our day and time, there are multiple forms of investment that can generate good returns for you.
Personally, I invest in real estate and mutual funds. I select mutual funds that generate on average about 10% return every year. I’m sure you know this already, stock market do crash from time to time, but in the long run, you will still be able to make good returns in the market.
I tend to stay away from single stocks because of the associated risks. (Toy R us)
If you want to invest in real estate, make sure you buy with cash.
Of course, I understand the benefits of using bank loan as leverage, but other people’s money also means you are taking on risks.
If you continue to invest for a long period of time (say 30 years), a time will come, your investment will be able to generate enough returns that should be sufficient to replace your salary. At that point, you can be considered as being financially free.
LESSON 2: CONTROL YOUR EXPENSES
- Control your expenses: The challenge for most people here is how can they save one-tenth of their income when the entire income is not even sufficient to pay for their expenses? Don’t buy frivolous things even if you have enough money to pay for them. Instead, make sure that you can continue to save one-tenth of what you bring in. Controlling our expenditures enable us to make good use of the money we have left over after we have paid ourselves.
TAKEAWAY: The goal of this lesson is to ensure that you are living within your means.
You must have a budget and ensure that you keep to your budget. Your budget is like a GPS that will tell your money where to go each month. You know what happens when you don’t follow your GPS, you get in trouble. You may drive into a ditch. In similar way, if you don’t follow your budget, you will get into debt, and end up being broke.
Cut down unnecessary things from your budget. Again, check out my blogpost on “5 Awesome ways to save more money”
Don’t try to keep up with the Joneses. Don’t buy a new car because your colleague just bought a new one. Don’t move into a more expensive neighborhood just because that’s where your friend just moved to. In my book winner’s ways, I wrote about the need to discard the Joneses and stay true to your mission.
LESSON 3: MAKE YOUR MONEY WORK FOR YOU
- Make your money work for you: Once you start to build up some savings, invest that money so that it will make more money for you. Another pretty clear point; if you start saving money, it shouldn’t just sit in a mattress. There are many investment vehicles we can use but the best thing we should all be aware of is that we should never invest in anything we do not completely understand. Investing our money will mean becoming knowledgeable about what we are investing in as well as the repercussions if the investment does not pan out as well as our potential exit strategies when we are ready to take our money out. There are many ways we can invest our money such as stock markets, real estate, businesses, and so on.
TAKEAWAY: The goal of this lesson is to ensure that you are getting great returns on your investments.
Money clings to the protection of the cautious owner who invests it under the advice of men wise in its handling.
Money labors diligently and contentedly for the wiser owner who finds for it profitable employment, multiplying even as the flocks of the field.
Compound interest has been called the 8th wonder of the world. Take advantage of it. For example, let’s say, you are investing $10,000 every year. Your investment is $10,000 at the end of year one. If you earn an interest of 10%, you will have an interest of $1,000, making a total of $11,000. Notice that at the beginning of year two, you now have your initial investment of $10,000 plus the interest of $1,000 working for you.
If you earn the same 10% at the end of year two, you will now have beginning amount ($11,000), plus year two saving of $10,000. At the end of year two, you will have $23,100. Without the compound effect, you will only have $22,000.
LESSON 4: PROTECT YOUR MONEY FROM LOSS
- Protect your money from loss: We must first secure small amounts and learn to protect them before God can entrust us with larger amount. The first sound principle of investment is security of the principal. Don’t take unnecessary risk if you are not sure that your money will be protected. “Guard thy treasure from loss by investing only where thy principal is safe, where it may be reclaimed if desirable, and where thou will not fail to collect a fair rental. Consult with wise men. Secure the advice of those experienced in the profitable handling of money.
TAKEAWAY: The goal of this lesson is to ensure that you do not put your money into what you do not have any knowledge about.
Before you invest your money in anything, do your research to acquire knowledge.
Before you start a business, perform feasibility study.
Money slips away from the man who invests it in business or purposes with which he is not familiar or which are not approved by those skilled in its keep.
Money flees the man who would force it to impossible earnings or who follows the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.
LESSON 5: INCREASE YOUR ABILITY TO EARN
- Increase your ability to earn: The best way we can increase our earning is by investing in ourselves. We can do that by continually learning and striving to develop ourselves. Work hard, look for opportunities, and educate yourself. Today, a college education is one of the best investments you can make; I’m not saying that it’s a requirement to be successful, but it opens the door to greater possibilities.
TAKEAWAY: The takeaway here is that you must strive for continuous improvement.
If you start a job, you must learn and continue to work hard to earn promotion so that your income can go higher.
You can learn new skills in order for you to take on more challenging role and more even more money.
You can find a problem around you and develop solution and you will find out that people will pay you for solving problems.
Brian Chesky, Joe Gebbia, and Nathan Blecharczyk came together to solve problems of accommodation by starting Airbnb, they made billions of dollars in the process.
Travis Kalanick and Garrett Camp came together to solve the problem of lack of affordable transportation by starting a ride sharing company – UBER. They became billionaires as a result.
There ae still tons of problems around us, you only have to look and be deliberate to find and solve them.
I hope I have been able to serve you today and you have learnt about wealth building strategy that will make you a good steward of your resources and help make your money last longer.
It is time to stop living pay check to paycheck.
It is time to make your money work for you.
The money rule highlighted in this book is simple, yet so many people ignore the rule. Practice the rules laid out in this book and you will soon be on your way to growth and financial prosperity.
Lesson 1: Pay yourself first!
Lesson 2: Control your expenses
Lesson 3: Make your money work for you.
Lesson 4: Protect your money from loss.
Lesson 5: Increase your ability to earn
And it’s a wrap. I hope these five lessons I learned from the Richest man in Babylon, have given you a new perspective on how to manage and win with your money.
So till next time again. Have a fantastic day and enjoy the remaining summer sun.
Now, go Win.