7 TIMELESS FINANCIAL PRINCIPLES FROM THE RICHEST MAN IN BABYLON

Author: Joan Nakagwe 

The 7 Timeless Financial Principles from The Richest Man in Babylon

Written nearly a century ago, George S. Clason’s “The Richest Man in Babylon” remains one of the most powerful books on personal finance ever written. Set in ancient Babylon, the wealthiest city of the ancient world, the book shares financial wisdom through parables and stories that are as relevant today as they were thousands of years ago.

The beauty of these principles lies in their simplicity. They don’t require complex investment strategies, advanced degrees in finance, or lucky breaks. They require only discipline, patience, and the willingness to apply timeless truths to your financial life.

Whether you’re drowning in debt, living paycheck to paycheck, or simply want to build greater wealth, these seven principles provide a road-map to financial freedom. Let’s explore each one and discover how to apply them in your life today.

Principle 1: Start Thy Purse to Fattening

“For every ten coins thou placest within thy purse, take out for use but nine.”

This is the foundation of all wealth building: pay yourself first. Before you pay bills, before you buy anything, set aside at least 10% of everything you earn. This money is not for spending. It’s for building your financial future.

Most people approach money backward. They earn, spend, and hope there’s something left to save. Wealthy people do the opposite. They earn, save, then spend what remains. This simple shift transforms your financial trajectory.

How to Apply This Today

Open a separate savings account that you don’t touch. The moment your paycheck arrives, automatically transfer 10% to this account. If 10% feels impossible right now, start with 5% or even 1%. The percentage matters less than establishing the habit.

Make it automatic. Set up automatic transfers so you never have to think about it or rely on willpower. What you don’t see, you won’t spend. Within months, you’ll adapt to living on 90% of your income, and your wealth will begin to accumulate.

This isn’t deprivation. It’s paying your future self first. Every dollar you save today is a soldier working for your financial freedom tomorrow.

Principle 2: Control Thy Expenditures

“Budget thy expenses that thou mayest have coins to pay for thy necessities, to pay for thy enjoyments, and to gratify thy worthwhile desires without spending more than nine-tenths of thy earnings.”

Earning more money doesn’t create wealth if your expenses rise with your income. This is why people earning six figures can be just as broke as those earning far less. The key isn’t just earning more; it’s controlling what flows out.

A budget isn’t a restriction. It’s a spending plan that ensures your money goes toward what truly matters to you, not toward impulses and things you don’t even remember buying.

How to Apply This Today

Track every penny you spend for one month. Every coffee, every subscription, every impulse purchase. You can’t control what you don’t measure. Most people are shocked to discover where their money actually goes. 

Distinguish between needs and wants. Needs are housing, food, utilities, transportation, and basic necessities. Everything else is a want. This doesn’t mean you can’t have wants, but you must be intentional about them.

Use the 50/30/20 rule as a starting framework: 50% for needs, 30% for wants, 20% for savings and debt repayment. Adjust these percentages based on your situation, but always prioritize saving.

Review your expenses ruthlessly. Cancel subscriptions you don’t use. Negotiate bills. Cook at home more often. Find free entertainment. Small leaks sink great ships. Plug the holes in your financial life.

Principle 3: Make Thy Gold Multiply

“Put each coin to laboring that it may reproduce its kind and create a stream of wealth that shall flow constantly into thy purse.”

Saving money is the first step, but wealth is built by making your money work for you. Money sitting idle loses value to inflation. Money invested grows exponentially through the power of compound interest.

The wealthy understand that every dollar saved should be a worker earning more dollars. They don’t let money sit idle. They put it to work in investments that generate returns.

How to Apply This Today

Once you’ve built an emergency fund of three to six months of expenses, begin investing. The stock market, through low-cost index funds, has historically returned about 10% annually over long periods. Real estate, businesses, and other investments also offer wealth-building opportunities.

Start with what you understand. If you’re new to investing, begin with simple, diversified index funds that track the overall market. As you learn more, you can explore other investment vehicles.

Take advantage of tax-advantaged accounts. Contribute to your employer’s retirement plan, especially if they offer matching contributions. That’s free money. Max out IRAs and other retirement accounts that provide tax benefits.

Reinvest your returns. Let your dividends and interest compound. The eighth wonder of the world, according to Einstein, is compound interest. A dollar invested at age 25 will be worth significantly more at retirement than a dollar invested at age 35, even though it’s the same dollar.

The key is time. The sooner you start investing, the more your money multiplies. Don’t wait for the perfect moment or until you have a large sum. Start small, but start now.

Principle 4: Guard Thy Treasures from Loss

“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.”

Building wealth means nothing if you lose it to poor decisions, scams, or excessive risk. Before chasing returns, protect your capital. The first rule of wealth building is: don’t lose money.

Many people, in their eagerness to get rich quickly, fall victim to schemes promising unrealistic returns. They invest in things they don’t understand, follow hot tips, or put all their eggs in one basket. Inevitably, they lose money.

How to Apply This Today

Never invest in anything you don’t understand. If someone’s explaining an investment opportunity and you’re confused, don’t invest. If it sounds too good to be true, it is. Legitimate investments don’t promise guaranteed high returns with no risk.

Diversify your investments. Don’t put all your money in one stock, one property, or one business. Spread your risk across different asset classes and investments. This way, if one investment fails, you don’t lose everything.

Be wary of debt disguised as investment. Credit card debt, payday loans, and other high-interest debt are wealth destroyers, not wealth builders. Before you invest a single dollar, eliminate high-interest debt.

Seek wise counsel from those who have successfully built wealth, not from your broke friends or people trying to sell you something. Find mentors, read books, educate yourself. Knowledge is your best protection against loss.

Keep adequate insurance. Health insurance, life insurance, disability insurance, and property insurance protect your wealth from catastrophic loss. These aren’t optional luxuries; they’re essential shields.

Principle 5: Make of Thy Dwelling a Profitable Investment

“Own thy own home.”

In ancient Babylon, Arkad taught that paying rent enriches your landlord while diminishing your purse. Owning your home means your housing payments build equity rather than disappearing into someone else’s pocket.

This principle isn’t about rushing into home-ownership at any cost. It’s about recognizing that your dwelling is one of your largest expenses, and turning that expense into an investment is financially wise.

How to Apply This Today

If you’re renting, create a plan to eventually own your home. This doesn’t mean buying immediately, especially if you’re not financially ready or your situation is unstable. It means making home-ownership a goal.

Save for a down payment. Aim for at least 20% to avoid private mortgage insurance and secure better interest rates. This takes time and discipline, but it’s worth it.

When you do buy, buy within your means. The bank might approve you for more than you can comfortably afford. Just because you can borrow more doesn’t mean you should. Keep your housing costs below 28% of your gross income.

Consider your home’s investment potential. Location matters. A home in a growing area with good schools and amenities tends to appreciate more than one in a declining area. Think long-term.

That said, recognize that home-ownership isn’t always the right choice for everyone. If you move frequently for work, if you’re still establishing your career, or if your local housing market is extremely expensive relative to rents, renting might make more sense temporarily.

The core principle is this: your dwelling is a major expense. Make strategic decisions about housing that build rather than drain your wealth.

Principle 6: Insure a Future Income

“Provide in advance for the needs of thy growing age and the protection of thy family.”

None of us lives forever. Our earning years are limited. Eventually, age or circumstance will reduce or eliminate our ability to work. Preparing for this reality isn’t pessimistic; it’s wise.

This principle encompasses both retirement planning and protecting your family if something happens to you. It’s about ensuring that you and your loved ones are financially secure regardless of what life brings.

How to Apply This Today

Start retirement savings immediately, no matter how young you are. Time is your greatest asset when building retirement wealth. Even small contributions in your twenties grow into substantial sums by retirement age due to compound interest.

Contribute enough to your employer retirement plan to get the full company match. If your employer matches 3% and you’re not contributing at least 3%, you’re leaving free money on the table.

Open and fund an IRA. Roth IRAs are particularly powerful for young people because contributions grow tax-free, and withdrawals in retirement are tax-free. Traditional IRAs offer tax deductions now, with taxes paid in retirement.

Calculate how much you’ll need in retirement. A common rule is that you’ll need 70-80% of your pre-retirement income annually. Use online retirement calculators to determine how much you should be saving monthly to reach that goal.

Get adequate life insurance if others depend on your income. Term life insurance is affordable and provides your family with financial security if you die prematurely. Don’t leave your loved ones in financial distress.

Consider disability insurance. You’re more likely to become disabled during your working years than to die. Disability insurance replaces your income if you can’t work due to illness or injury.

Build multiple income streams. Don’t rely solely on one job or one source of income. Develop side businesses, rental income, dividend income, or other revenue sources. Diversified income provides security and accelerates wealth building.

Principle 7: Increase Thy Ability to Earn

“Cultivate thy own powers, study and become wiser, become more skillful, respect thyself.”

Your greatest wealth-building asset isn’t your savings account or investments. It’s your ability to earn income. The more valuable your skills, the more income you can generate. Investing in yourself provides the highest returns.

People who continuously learn, develop new skills, and increase their value in the marketplace consistently out-earn those who remain static. Your earning potential can grow infinitely if you’re committed to growth.

How to Apply This Today

Never stop learning. Read books in your field. Take courses. Attend workshops and conferences. Stay current with industry trends. In today’s rapidly changing world, yesterday’s skills quickly become obsolete.

Develop high-income skills. Some skills pay more than others. Identify what skills are valuable in your industry or desired career path, then deliberately develop them. Sales, marketing, programming, writing, public speaking, and leadership are examples of high-value skills.

Seek feedback and mentorship. Find people who are where you want to be and learn from them. Be coach-able. Accept constructive criticism and use it to improve.

Invest in formal education when it provides clear ROI. Some degrees and certifications dramatically increase earning potential. Others provide knowledge but limited financial returns. Be strategic about education investments.

Build your network. Many opportunities come through relationships. Attend industry events. Connect with people in your field. Provide value to others. Your network is part of your earning potential.

Take calculated risks in your career. Sometimes, increasing your earning ability means changing jobs, starting a business, or relocating. Don’t let fear keep you stuck in a low-earning situation when better opportunities exist.

Track and negotiate your compensation. Know your market value. When you’ve increased your skills and value, don’t be afraid to ask for raises or seek better-paying positions. Many people under-earn simply because they never ask.

The Power of Ancient Wisdom in Modern Times

These seven principles from “The Richest Man in Babylon” have survived for thousands of years because they’re based on unchanging truths about money and human nature. Economies change, technologies evolve, but the fundamental principles of wealth building remain constant.

The wealthy throughout history have followed these principles, whether consciously or unconsciously. Pay yourself first. Control spending. Invest wisely. Protect your assets. Own appreciating assets. Plan for the future. Continuously increase your earning power.

You don’t need to be brilliant to build wealth. You don’t need a high income to start, though increasing your income accelerates the process. You need discipline, patience, and commitment to following proven principles.

Your Path Forward

Financial freedom isn’t built overnight. It’s built through daily decisions, small disciplines repeated over time, and consistent application of these timeless principles.

Start today. Choose one principle to implement this week. Maybe it’s setting up that automatic savings transfer. Maybe it’s creating your first budget. Maybe it’s signing up for your employer’s retirement plan. Maybe it’s reading a book to increase your financial knowledge.

One principle, one action, one step forward. Then another. And another.

The richest person in Babylon wasn’t born wealthy. He became wealthy by learning and applying these principles. You can do the same. The question isn’t whether these principles work. The question is whether you’ll apply them.

"Your financial future is being written right now by the decisions you make today. Choose wisely."

Written by Joan Nakagwe 

Follow: thejourney2wealth.blogspot.com

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