Introduction
Author: George S. Clason
I decided to start this series about books I’m reading because it’s a a nice change of pace from the more objective and analytical posts regarding our finances. There is so much knowledge that we can get from books, and I hope that this blog series can help shine some light on great works of art that have benefited me in my personal life or books that were just an enjoyable read.
This is a book that was gifted to me for my birthday a few years back, and although I had read it at the time, I decided to pick it back up again as a refresher for some timeless money lessons.
The book was originally published in 1926 and even though it reads as a true story, it is not based on any real people or events. The idea of the book is that there was a poor scribe who went by the name of Arkad living in Babylon, one of the most famous ancient cities. Arkad eventually becomes the richest man in the city, and it documents his journey and some of the lessons he learned which helped him grow his wealth. It’s not a story in the traditional sense, but more like a collection of stories centered primarily around Arkad. It’s a super easy read, and breaks down personal finance in a way that’s simple to understand and apply to your life.
This specific blog is going to format the different lessons shared throughout the book:
Pay Yourself First
Probably one of the core concepts from the book is the idea that you should be putting aside some money for yourself. The book uses 10% as kind of a baseline savings amount, although the reality is that not everyone can afford to save 10% of their savings, especially if they have monthly obligations.
With that said, you should try your best to put something aside for yourself after each paycheck you earn, even if its a small amount, it is better than nothing. The idea is to save before you start spending your money, whether it’s a general savings account, or towards a goal you have.
With the power of compound interest, even a little goes a long way.
Managing Expenses
One of the easiest ways for someone to lose track of their spending is to continuously overspend on things they want as opposed to things they need.
It doesn’t necessarily mean that we need to create a budget down to the penny, but just having the awareness of where our money is going and how we are spending it can help us build better financial habits. When you are intentional with your spending, you can better align your money with what you actually value.
Put Your Money to Work
If your money is sitting in a checking account, or as cash under your mattress, you are losing out on the potential to grow your wealth. When you invest your money, whether its in a business, the stock market, or any other venture, it has the ability to grow much more than it would doing nothing.
There are many situations where sitting on your cash makes more sense than taking the risk, especially if you have cash needs in the short-term, but if there is an opportunity to make your money work for you, and the risk has been calculated as one worth taking, then compound interest should do the rest of the job.
Protecting Your Wealth
In the same way your money can grow when you invest, there is also the probability that you may lose that money.
In today’s world, where it seems like everyone on social media is making hundreds of thousands trading crypto, or using AI algorithms to generate income, it’s easy to think you can replicate that success. The unfortunate reality is that when you don’t do your proper research and take time to learn what the risks are, you are actually taking an even bigger risk of losing your principal investment.
Taking risks is how people find success, both in financial matters and personal situations. Spending some time calculating what those risks are can save you from a lifetime of regret and digging yourself a deep hole.
You are your Best Investment
When I decided to quit my job and start this business, I took a chance on myself. I decided that I was going to be in control of my own destiny, and so far I can say that I’m glad I made that decision.
If you were to invest in the stock of a company, sure you can do all of your due diligence before clicking the buy button, but what goes on at the company is ultimately out of your hands. If the CEO decides to cut their best employee, chances are you are not going to be able to sway that decision.
However, investing in yourself is something that you are able to control. Maybe you learn a new skill that will make you better in your role and provide a better salary. That new skill can also benefit you in ways that don’t necessarily have to be purely financial, even that that is the premise of the book.
Conclusion
There are many more lessons that can be learned from this book, but these were some of the few that stood out to me personally.
As a financial planner, I love reading books like this because I can take some of these principals and apply them to not just my own life, but my clients as well.
This is the first version of this type of blog post, and I just wanted to get my thoughts out there. Plus I’ve been lacking a bit on my reading, so I’m kind of hoping this pushes me to actually finish the collection of books I have sitting on my shelf.
Disclosure
This content is provided for informational and educational purposes only and should not be construed as personalized investment, tax, or legal advice. No advisory relationship is created by reading this article. Investment advisory & financial planning services are offered only pursuant to a written agreement through Noor Financial Services, a Registered Investment Adviser. Please consult with a qualified professional regarding your specific financial situation.
