An Oldie, But A Goodie.

As a Business major with a minor in Financial Planning, I have read a lot of finance books.  Out of all of the books I have ever read on personal finance, though, the one I recommend most highly is The Richest Man in Babylon by George S. Clason.  Even though it was originally published almost 90 years ago, I have never found a book that explains the underlying concepts of money management and wealth-building better than The Richest Man in Babylon.  Along with Robert Kiyosaki's Rich Dad, Poor Dad, this is one finance book that I believe belongs in every home.


Clason originally published this masterful work around the 1920s as a series of pamphlets that were handed out to customers by banks and insurance agencies.  The pamphlets explained the concepts of financial literacy through parables set in ancient Babylon, a city which was renowned for its incredible amount of wealth.  The language used in the writing is a bit archaic, and sounds reminiscent of the King James version of the Bible.  While some would consider the style a little dry, it is not too complicated to be easily understood by most people.

The title, taken from one of the pamphlets that made up the book, refers to a man named Arkad, who had amassed incredible wealth over his lifetime.  His ability to become wealthy was so renowned that many people sought his advice in financial matters, including the king.  The early chapters of the book center around Arkad and his teachings, though later chapters revolve around different characters.

Recurring Themes

Most of the stories throughout the book feature a protagonist who is (or was) deeply in debt.  The stories tell of how these men, through dedication, focus, and planning, pay back their debts and start building wealth.  Clason draws a very clear distinction between the misery these men fell while in debt, and the freedom they feel when their debts are repaid in full.  In several cases, the freedom is quite literal--several characters actually escape from a life of slavery through their dedication to paying their debts.

The overarching theme taught throughout the book is the concept of paying yourself first.  Clason made it clear that saving one tenth of one's earnings before spending any of the money is the real key to becoming wealthy.  This concept has been echoed for decades by personal finance gurus like Robert Kiyosaki, David Bach, and Dave Ramsey, and for good reason.

By setting aside ten percent of your earnings before paying your bills and buying luxuries, you create something called an "environment of artificial scarcity".  While that sounds like a bad thing, it actually forces you to budget more effectively, and ensures that you spend less money on things you don't need.  Meanwhile, that ten percent of your income is placed into some sort of investment, to grow slowly but surely over the years.


My favorite chapter of this wonderful book is near the end.  The chapter is entitled "The Luckiest Man In Babylon", and it relates the tale of Sharru Nada, a wealthy merchant.  Sharru Nada tells the story of how he came to be rich to the grandson of his old business partner in order to save the youth from wasting his inheritance and winding up poor.

Sharru Nada had been sold into slavery to repay a debt incurred by his brother (a common practice in ancient Babylon).  In telling his story, Sharru Nada relates how he managed to cast off the shackles of slavery, regain his honor, and come to be a rich and well-respected man in Babylon through dedication and hard work.  Like the other stories throughout the book, this one carries a strong moral--hard work is both its own reward and the path to prosperity.

Another excellent chapter is "The Five Laws of Gold".  In this chapter, Arkad's son, Nomasir, returns to his father's house after ten years of living on his own.   Arkad had given Nomasir a bag of gold and a clay tablet bearing Arkad's five laws governing the wise handling of money.  Upon his return to his father's house, Nomasir tells of how he quickly lost the gold given to him by his father ten years before through his foolishness.  At that time, he turned to the wisdom written on the clay tablet.

Through hard work and dedication, Nomasir began to rebuild the wealth that he had squandered.  Within the ten years' time, he had learned how to make money work for him through the study of his father's five laws.  Upon his return, Nomasir presents Arkad with one bag of gold to replay the bag he had been given ten years before.  He then presented two more bags of gold, telling his father that he values the wisdom inscribed on the tablet far more than the gold.