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The Richest Man In Babylon Summary: 7 Key Takeaways To Accumulate Wealth

The Richest Man In Babylon, written by George Clason, is a series of parables set in ancient Babylon about financial wisdom.

The parables tell the story of a Babylonian guy by the name of Arkad, who used some basic financial knowledge to build up a great deal of wealth.

The two stories began with characters Bansir (a chariot builder) and Kobbi ( a musician). Basir and Kobbi were experts at their crafts but they were poor.

They sought out the knowledge and advice of their childhood friend, Arkad. Arkad had grown to be very wealthy.

The lessons that Arkad provided to his friends are laid out like Aesop’s fables in the book. Each story includes financial lessons.

These lessons teach you how to get ahead financially. They are the lessons of building wealth that the rich has followed for centuries.

In today’s summary, you’ll find that we’ve distilled these parables down into 7 key ideas from the book.

Richest Man In Babylon Summary

1. The secret to building wealth is to save and invest wisely

You need to pay yourself first. You cannot accumulate wealth if you don’t save what you earn, nor can you accumulate wealth if you spend everything you earn.

The best way to accumulate wealth is by paying yourself first before you span any income on necessities or debts. So for every $100 dollars you earn, save $10 for investing. This equates to 10% of your income.

Don’t leave it in your checking account. Put it away in a savings or investment account. If you leave it in your checking account, it will be spent.

The remaining 90% can be used to pay your bills and expenses, but that 10% is yours to set aside to make more money for yourself.

Now I know you may be thinking that you can’t afford to set aside 10% because you’re barely able to pay your normal bills.

This is almost always never true. Take an inventory of your spending and expenses and to see what you’re spending money on.

Can you cut back on cable and just stream Netflix? Can you consolidate some of your current debt? What about a second job or side hustle?

In the book, George Clason writes, “If you have not acquired more than a bare existence in the years since you were youths, it is because you either have failed to learn the laws that govern the building of wealth, or else you do not observe them.”

Always remember that a part of all you earn is yours to keep and it should be no less than 10%.

2. Don’t Overspend

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‘Control Thy Expenses.’ Clason goes on in this section by saying to “budget your expenses so that you may have money to pay for your necessities, to pay for your enjoyments and to gratify your desires without spending more than nine-tenths of your earnings.”

What this means is to not spend more than 90% of what you earn. The path to wealth is to increase your income while keeping your expenses down.

Many people have fallen into the trap of getting into the habit of spending more as their income increases.

So although they may have the fancy cars, clothes, big house and nice gadgets, this will not accumulate wealth. These are all liabilities.

If you’re already spending more than what you make, take some time and make a list of your expenses, then figure out how you can get those down below 90%.

This is a difficult step and can take some time but it is necessary to do if you want to start building wealth.

3. Put Your Money To Work For You

“Put each coin to laboring that it may reproduce it’s kind even as the flocks of the field and help bring to the income, a stream of wealth that shall flow constantly into they purse.”

Once you’ve gotten your expenses down and have started saving 10% of your income, you can then begin to look at things to invest in.

If you want to accumulate wealth, it’s important to put your money into investments so that these investments can make you more money.

Just to give some examples, these investments can come in the form of spending your money on something that will make you more such as enhancing your professional skills in a particular area that can earn you more.

Example would be a programmer investing in a course to learn a new language to take on higher tier client projects or to get a higher paying job.

Another example would be an attorney spending money on software to make his practice more efficient so that he can bill more time.

Many smart people also go all in and spend their money on investing in real estate, stocks, funds, crypto, etc.

As you get better at managing money, you’ll learn where to devote your resources to things where you will have an opportunity to get big returns.

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Keep in mind that not all investing is good investing. Reckless investing is just about the same as reckless spending. Never invest in anything you don’t fully understand.

Investing your money will require becoming knowledgable about what you want to invest in, rather you have the means to hire smart people or taking the time to learn this skill yourself.

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5. Make investments where you are paid back with interest.

When you take out a student loan, chances are, you have to pay interest. Alternatively, when you loan someone money, you can expect them to pay interest on it.

This is one of the key ways in which people with money can attain more wealth. Imagine you want to start a coffee shop. What do you need?

You’ll need all the equipment and supplies in order to operate this shop. Additionally, you’ll need people to make the coffee and take care of the customers. You need to pay for all of this, so you’ll also need capital.

Looking at it this way, capital is a resource like any other which must be paid for. To attract employees, you need to offer a salary and in the same way, to attract capital, you need to offer the investors something: Interest.

As an invest, interest is an attractive way of building wealth because of its compounding factor. You can get your interest earnings to keep increasing over time.

For example, imagine that you just invested $100k in a new business and on your agreed date, the owner pays you back the original amount plus 10% interest. This total is $110k.

You go ahead and reinvest the entire amount into another business with the same terms. This time, you’ll be earning $121k, which means that your interest have increased.

If you continue this process over and over, your money will compound and increase tremendously over time. That my friend is the power of compounding interest.

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6. Word hard to spot and seize opportunities.

Don’t wait for opportunities to fall in your lap. Be proactive and seize them or you’ll miss out. If you want to increase the number of opportunities you see, you’ll need to work hard.

Study and investigate areas that you are interested in and build a network around you. This way, you’ll get good at spotting certain opportunities when they come around.

7. Be smart about your expenses and don’t take on debt.

You ever wonder how many people end up in a financial nightmare? This usually stem from making irrational financial decisions.

How can you avoid this? First, you need to base all of your costs on a realistic assessment of your personal needs and financial circumstances.

Let’s say you want a new, fancy ‘schmancy’ truck. You don’t really need it and buying it would require you to take out a major loan with crazy terms.

You do it anyway. You buy the truck. Now you’re burning through a big chunk of your income just to pay off the interest. Then you finally hit the point when you should pay back the actual debt.

But now you can’t afford it, so you take out another loan just so you can pay this one off….and just like that, you end up in a debt spiral.

Better hope that truck comes with a bathroom and a kitchen.

No but seriously, taking on debt in general is a bad idea because it’s super difficult to be able to save up money in order to invest and build wealth.

Instead you’ll be spending your income on debts. Or as we call them, Liabilities as opposed to Assets.

What Was Your Favorite Takeaway From The Richest Man In Babylon Summary?

The biggest message from this book is that the secret to becoming wealthy is living below your means so that you can save money and invest in a way that generates more money for you in the long term.

You must also understand that you can earn your own luck by working hard and seizing opportunities with confidence.

Actionable takeaways for you would be to never take on unnecessary debt to buy liabilities such as a car, or some type of luxury item that will not earn you money in return.

Debt is difficult to get out of so if you can’t afford something you want, save up, or increase your income and buy it later.

The other takeaway is to wisely invest part of what you earn. Be smart about it. Don’t invest recklessly.

Make sure you do your due diligence and study the investment thoroughly before diving in.

Pick up a copy of The Richest Man In Babylon here.

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