Are all Finance Books Boring?
The Richest Man In Babylon is a book that was published over 100 years ago. The content is about personal finance and investing with an easy to read story line which makes it more entertaining than other sources of learning. I can recommend this to anyone who is non-finance related. It doesn’t use finance lingo which is boring to most people. It is for readers at any level. It would be a great tool to teach children about finance because the story line which is entertaining.
What Is So Special About Babylon?
The Richest Man In Babylon was written about the Babylon people because they are the first known population to use a similar financial system to our modern day system. According to passages in the book, this was translated off ancient plates found by geologists. I am not sure if these are fables or factual but this also makes The Richest Man In Babylon more interesting than other short novels.
Important Concepts in The Richest Man In Babylon
Invest in Yourself
The great motivational speaker and author Earl Nightengale breaks this down better than anyone. The way to increase our income is the need for what you do and your ability to do it. What this lesson is telling us is to increase our ability to do our job or run our business. It is the most important lessons from The Richest Man In Babylon.
Track Your Networth
This common theme throughout the book tells you that you need to plan and track your accomplishments. This is why we have built a page about net worth calculation. Our free net worth calculator is a great starting point for tracking your personal finances.
Pay Yourself First
To many of you, this particular one might sound backward. Aren’t you supposed to pay your bills first? The simple answer is no you want to pay yourself a percentage of your income. You could make all the money in the world but if you don’t save money before you make purchases you will never increase your net worth. You will see your accounts grow over time.
Control Your Expenses
The reason why this is “controlling your expenses” is because it is impossible to predict your expenses in real life. I come from the accounting field and there is an accountant called a controller who sets a budget and looks at how the company did. There isn’t a software around sophisticated enough to predict the outcome so the budget isn’t perfect. In our personal finances, this is a tool that we can use. Create a budget then compare it to our actual expenses.
This is a concept that was brought up in The Richest Man In Babylon. The compounding effect of interest is a slow way to wealth but pays off in the long run. What happens is you get paid interest which makes you more interest. Your payout is increasing over time making interest accumulate faster.
The Richest Man In Babylon talks about risk management. Risk management in personal finance would look different than in the business or investing world. In personal finance, we control risk by having life, health, homeowners, and auto insurance to protect us from getting wiped out financially.
Invest In a Home
The Richest Man In Babylon talks about “investing in a dwelling.” This means to be smart about purchasing a home. We all see what happens when the real estate market forms a bubble. Learn about the right times to purchase your dwelling and be smart about the financing. When it is paid off you no longer have to pay rent or a mortgage.
This is another thing that should catch your attention. In the present day, there is a safety net of Social Security. There are two problems with this fund. First, Social Security is broke. There is a good chance that the younger generations will need to fund their retirement. Second, the maximum payout is $1,300 a month. It would be impassable to retire on that ammount of money so it is better to work on your own retirment.