Week 3 [22-28.10.18] 7 lessons learned about personal finances from “The Richest Man in Babylon” by George S. Clason.
For some people, money management and personal finance are not the most comfortable topics to discuss because not all of us have enough knowledge and experience that give enough courage to talk about money. In fact, almost everything we learn about money comes from routine financial interactions we perform every day or month like paying the rent and bills or creating a bank account or even by just asking or googling simple questions involving finances. Most of this knowledge, of course, comes to us from our parents and if they didn’t know how to manage money properly, which resulted in financial problems than we might also do this wrong because we emulate their financial behavior. It’s really strange that such an important skill which we will absolutely need in our life is never taught by teachers in schools. Of course, the school system is here to be blamed but if you think about this for a second then you start to realize that the system in which people don’t have a proper financial education is more likely to spend more money on things they don’t need or can’t afford. As a consumer you don’t benefit from this but some other people do. So what can we do about this. Well, the answer is simple - educate ourselves. But where should we start?
“The Richest Man in Babylon” is truly a remarkable book because it teaches us the most crucial things about money that we need to know in an interesting storytelling format. The story starts in ancient Babylon where we learn about characters Bansir who is a chariot builder and his best friend Kobbi who is a musician. The two are very good at their crafts but despite their skills, they are still poor and lack any motivation to continue working for their dreams. So they decided to seek out for some help to their friend Arkad who is considered to be the richest man in the city. The lessons that Arkad gave to his friend is the main focus of the entire book. They are habits every person should build if they want to increase their wealth and become rich. Despite the fact that all those rules were given to men who lived in ancient times, those lessons are still applicable to our modern world. Here is a brief summary of 7 lessons learned from that book:
1. “Start thy purse to fattening”
This statement is actually simple and straightforward. If you want to grow wealth you need to remember to pay yourself first. So if you work and receive some income then you should save at least 10% of all your earnings (if you can you can save more than 10%). Because of the unpredictable nature of future, you must assure yourself by consistently setting aside part of your earnings that no matter what, you have money to keep yourself stable.
2. “Control thy expenditures”
You can’t grow wealth if you have a tendency to spend more money than you actually need. Remember to live within your means and avoid lifestyle inflation. Spend money on things that are absolutely necessary.
3. “Make thy gold multiply”
In order to grow you need to invest your money and let them work for you. That way you will take advantage of time and compounding interest.
4. “Guard thy treasures from loss”
You always need to take into account potential risks that may cost you a big amount of money. The penalty of risk is the potential for loss. If an accident happens you must be prepared for it (for example buy insurance).
5. “Make of thy dwelling a profitable investment”
If you pay rent to a landlord all your life you will end up with nothing that can represent the result of your payments (for example your own house). The book suggests that it has more sense to pay for a thing that you will own in the end.6. “Insure a future income
Eventually, everyone will retire when they become old and the book suggests preparing for your retirement. It might be saving money like in lesson 1 or having an insurance.
7. “Invest in ourselves.”
1. Do you agree with all these rules?
2. What rule you would like to add?
3. What are your thoughts on the topic of personal finances?
Sources:
https://en.wikipedia.org/wiki/The_Richest_Man_in_Babylon_(book)
https://www.youtube.com/watch?v=G4MnrKLphrQ
Comments
I don’t know whether we can make a rule from it but I’d like to add that all those rules will be more profitable when you will be self confident and brave but don’t be hasty!
It’s obvious that I’d like to have a nice amount of money but as for now I’m ready not to waste money and save them instead. I’d like to save some money to invest them in near future and generally I’m considering many options so I have my finger on the pulse of finances.
You don't want to save everything and don't spend money on fun things or travelling or so on because if you won't use it on something that will give you hapiness so what is the point of saving it. I would suggest creating 3 bank accounts where 1 would be for saved money, 2 would be to spend money on every day need and 3 would be for future planned trips or for example courses you would love to take.
Personal finance is really important in everyone life and it tells you everything about a person. I think everyone should spend a while on figuring out that topic and the future of it in their life.
2. I would like to add a rule that would be related to charity. Since I believe that in life it is important not only to receive but also to give. And of course, most likely this rule would have sounded "Found the money - share with the needy." This is not the final version of the rule;)
3. I believe that, despite the fact that all the rules are accessible and understandable, it is often difficult to postpone 10%, as there is always something to buy. It is still difficult to pay for insurance 1/3 of the salary. In general, it is sometimes hard to adhere to the rules, but I think that it is enough just to remember them and someday it will be possible to apply them.
I would also recommend some others books when it comes to finance topic. First one is "Rich dad, poor dad" by Robert Kyosaki. It's not a new book, but when I read it when I was like in 6th grade I thought that it's this kind of book that will affect your future. Kyosaki talks mostly about rat race and how not to fall into it.
Other book is "Power of habit" by Charles Duhigg. This book will show you how important it is to be organised but not only that. I really recommend to you both of that books if you haven't read it. Cheers!
1. “Start thy purse to fattening”. You should never forget about such fact as inflation. If you start saving 10% of your income you will be constantly losing some small amount of it due to the inflation. The more you save, the more you lose. I don’t mean that you should spent every single dollar on something useless in order not to lose this money due to inflation but you should invest these money in something you strongly believe is profitable or will be profitable, in something that will make money for you.
2. “Guard thy treasures from loss”. I am not 100% sure but it’s rather waste of money(for most people). The probability of an accident is relatively low so you will simply spend lots of money but overall it’s just my point of view.
All these rules are pretty meaningful but the hardest part is to start applying them.
I think that knowing how to save the money is as important as knowing how to spent them. People usually save money to afford something they really want to have but sometimes they are too focused on earning that they forget to spend. I think collecting money just for having more of them is pointless and that is something what people should have in mind as well.
In my opinion being able to manage your personal finance is clue to being successfull and I think everybody should spend some time to manage them properly
On the subject of finances, I think that the best option for making money and investing is real estate, and that's where we should invest the most money
2. Financial education. No, I do not mean studying economics at the university. This is primarily a superficial study of the financial situation of their country. I know this is boring. But thanks to this, you can quickly decide when it is better to carry out these or other financial transactions, what to invest in, and so on.
3. I believe that this topic is integral to the life of every person. After all, having thought it over in advance, we can significantly simplify our lives in the future.
I create some new rule for me: at the start of a year or after summer make some list of needs, write their cost, prioritize them and write some deadlines to buy them. It helps me define how much I should earn until a certain date and helps to save more.
2. Control the expenditures is a very important thing and I want to expend it by "monitoring expenditures and weekly review"- it helps a lot.
3. My thoughts? Managing your finances is a crucial skill and the future yourself will be grateful for it.
Personally, I am trying to save money and this is quite effective. I put money on deposits, but I would like to start investing in something that will bring more profits.
Keeping 10% of incomes and controlling expenses are very important in any person’s daily life.
From my personal experience, I can say that my financial control lacks planning. If I've collected some statistics, I am pretty sure that I'd saved much more money. Maybe I have to invest more in personal time to be able to do so.
2. I think that I do not have any rules in terms of personal finances because I am not good at it at all. I usually spend all my money on stupid things and I fine with that. But I have an advice “Do not think too much” it is a simple rule and it makes my life much easier.
3. My main thought is that I am not good at it. I should finally do something with it. Maybe I should start preparing for my retirement because I do not believe that I will have enough money to buy all those expensive drugs.
As a additional rule I would add to check your finances from time to time and calculate if you can save more or your situation force you to save a bit less.
Everyday we earn some money and spend it. It's obvious. But it has to be under control. It's really easy to spend all money we have and at the end of the month we left with nothing in our wallet. Everyone should control and calculate their finances every day.
Can’t think of any.
I think I should spend more time thinking on the topic of personal finances and management of it, not just mu financial state.
- except for paying yourself (saving 10% of your income) also set aside another 10% of your money and just blow it off on whatever you wish. People are earning money also to feel good, to buy themselves something pretty, or a game or something for their hobby. But then they spend it on other things or save and there is a growning pressure to spend some money on ourselves. And that sometimes eats our savings once we feel like we just have to buy something expensive.
So set aside 10% of your earnings each month and just have fun with it. It's healthy for your soul.
- don't mistake buying expensive things and investing. Buying a car or a house is not investing. It actually increases your costs of living and will not bring you any new money.
2) If i could i will add only one rules: try to keep all rules, but remember about the most important of them its don't be stingy for your friends/ family, because money cannot replace the people.
3) In my opinion people who are satisfacted for their personal finances don't have a problem to talk about their financial status. For example many often they meet with other person to talk about buisness or their a new investiotion.
It's good to save 10% of income every month. It's stupid not to have insurance. It's very good to make money "work". But you know what? I prefer the lifestyle where I can affrod buying many things that I like, invest in my hobbies etc. That's how I develop myself in times like these. For me it's stupid to buy only necessary things, what fun from life do you have? More money? I want to live now, not beeing rich at the age of 60-70 when I will have no health and power to invest in my hobbies. I will have money like I do now cause of the savings, but I want to afford a tasty cheesburger than eating bread with cheese. I prefer to buy some games, guitars, spiders, go to restaurant every week with my girlfriend, than sitting in front of TV calculating amount money which and imagine what I will buy for those after 40 years :D
I'd like to add rule: "live your life now, develop yourself, but remember about the future".
Simple huh? Have some money, but do not live saving all the time.
2) I would say "Live in the moment and have fun - don't let your brain stay in the past or live in the future" - I know that saving money is important, but if you'll be saving money all the time(all of them), then when will be a good time to spend it? My rule is to save 33%, invest in myself 33% and spend it rest on a daily basis. Same with the job - why going to the job that offers you a lot of money but makes you unhappy? I'd rather make less money but live happy.
3) Learn how to make money, learn how to manage your money and learn how to spend it properly. It's your money and your choices - You dont have to listen to other people saing "you just waste your mone by buing XXX" -> simply answear "yeah, it was my money". With better knowlage comes better results. Thats my opinion
2. I think it's good to save some % of Your salary for "hobby fund" as I call it. Let's say that each month You save 5, 10 or 15 percents for Your hobby or simply entertainment - because You have organised it this way, You should not hesitate to spend them, You are calm because You have another "fund" for Your house, and another for "bad times".
3. I think I and a lot of people don't have enough knowledge in this topic. Blaming education system is one thing, but I think it's also handy for banks and other organisations
Live with your owns beliefs, don't give up environment's impact.
I think that implementation of finanacial managment as a subject in high school would be very useful, I try to live on the level, what i can afford for, but every day i observe people who don't do it.
Taking life easy sometimes can put us in huge troubles, we should be aware of what we do and how we spend our money.
I think that it's good to spend some money on your happiness. Of course, I'm not talking about everything what you have. In my opinion, it's good to spend about 5% on your lovely things. It can have good impact on your mood and productivity. Next, it's good to monitor your spending. You should be aware of that. When you know about your daily expenses, you can organize that and save a lot of money. To be honest, I don't have any special tools for that. My bank application is enough for me. I have turned on all notifications and created special chart with my spendings. Additionally, I like to make summary at the end of the month.
I agree with every word. I think finances is of the gaps in current education programs, we more focused on art and philosophy (that's also important), but when we collide with everyday routine like money, we absolutely not prepared for this.
2. What rule you would like to add?
When I was teenager I've read the book, that my dad advised me to read. It called "Rich Dad Poor Dad", and despite many people don't like this book, I personally think it's brilliant. In this book was a thought, that we should invest in actives, and not in passives, that basically means, if something you purchase does not help you earn, and just burns your money, maybe you don't need to buy it.
3. What are your thoughts on the topic of personal finances?
I think that's finances is really important part of our lives, and we should care about them more.
I think the topic of personal financing nowadays is less important than it should be. It especially concerns young people who progress through the corporate ladder quickly and become victims of „lifestyle inflation”. They tend to have bigger expenses than they actually need. I was one of those people as well, although I started to control it after I noticed this behaviour is just not profitable in the long term.
2. I would add that money spent on things we really love is also investment.
3. I think our education system should more focus on economy or just operating with money. There are so many people that are caught on things like scam loans with 100% RRSO. It could also cover topic of tax settlements
George Samuel Clason is a famous person. He is an american author who write one of the best selling books - The Richest Man in Babylon. The person who started The Clason Map Company that did not survive The Great Depression. Person who wasn't a financier but teach people how to earn money even after his death.
For me his books are nonsense, fiction. If I want learn something about earning or keeping money, I will read financial and economics literature. If these literature will be to hard to understand for me, I will read The Financier by Theodore Dreiser again.
I prefer not to say anything about telling people how to make money because in this way I can harm someone very much but If I have to do it, I Would add the rule: „Build yourself” because always in companies consisting of several people later will be many conflicts.
As for my own person, it is very easy for me to spend money without control but in my opinion the main rule should be to think to times before you spend money.
2. I can add advice to plan some expenses like holidays. You can save some money on first minute offers.
3. I think personal financie is very crucial and school should teach about this topic, but ofcourse we cannot overdo it, becouse we can become a miser.
Yes I agree with the rules, but I know that saving money is very hard. Nowadays everything is pretty expensive compared to average salary. Probably if people follow these rules It might improve their quality of life.
Maybe save 10 % from each salary on different account, I am doing it for over a year and I 've never been in uncomortable position when I don't have money for some important stuff.
Personal finances are very important and we should always pay attention to it. It is very easy to lost your mind and find youself in bad spot when something unexpected happen like vist to the doctor or gift for birthday to your loved one.
All tips mentioned in the above article are very valuable and useful if someone wants to implement a saving plan in their lives.
Of course, you can have a lot of your equally effective ideas, but the basic question is to think about what I really need? How much do I have to spend this month and how much did I lose on unnecessary things?
I always share my budget after payment, some money is untouchable, it is a part responsible for bills and food, the second part is expenses like pleasures, clothes, etc.
Thanks to this, I never allow situations in which I lack money.