A Must-Read Personal Finance Guide For All Ages
I was introduced to this masterpiece by listening to some of the lectures of Jim Rohn, the American personal development guru who gave most of these lectures in the second half of the 20th century. He postulates that, as an integral part of personal development, financial discipline is paramount to the general stability of anyone old enough to take up responsibility for themselves and others around them. As part of these personal development series, his lectures on financial discipline focused significantly on The Richest Man In Babylon, the book by George S. Clason. Anyone who has flipped through the pages of that book will understand why Rohn was obsessed with it. Written in the 1920s, the book provides a timeless guidance on how to acquire, maintain, and increase wealth.
The book is a collection of parables playing out in ancient Babylon. The parables, some of which are prescriptive in nature relative to the laws handed out, are quite well structured. Anyone reading the book will immediately figure out that ‘gold’ as used throughout the parable refers to money in our contemporary times. The anecdotal approach of the author in passing down this much needed wisdom on the acquisition and preservation of ‘gold’ seems to be a more suitable method of distilling the main concepts of the book down to the reader. Clason authored a book for all ages and dispensation and I would personally recommend it to every young person who is enlightened enough to understand the words contained therein. The principles enshrined throughout its pages are applicable to any period of human existence and a comprehensive knowledge of those ideas can go a long way in improving the financial health of anyone coming across its pages.
The book has eleven (11) chapters, with one (1) of those chapters being a ‘Historical Sketch of Babylon’ while the other ten (10) chapters unwrap parables and laws on the acquisition, preservation, and multiplication of our ‘gold’. Consider the following opening lines at the beginning of the book, before even delving into the first chapter: “Money is the medium by which earthly success is measured. Money makes possible the enjoyment of the best the earth affords. Money is plentiful for those who understand the simple laws which govern its acquisition. Money is governed today by the same laws which controlled it when prosperous men thronged the streets of Babylon, six thousand years ago.” While I do not fully agree with some of the statements by the author, but you can understand why Jim Rohn was obsessed by the book. I have therefore set out, in this review, to give my opinion on the laws and general precepts the author passed down by means of the parables and consider their applicability to our contemporary financial situations.
Clason explores, through his well told parables, the actual workings of capitalism as an economic system. You might not need a professor, after all, to lecture you on the introductory concepts of capitalism after thoroughly digesting this book. From banking and insurance to trade and commerce, it is a perfect beginner’s guide to all the underlying ideas guiding capitalism. In addition to its capitalistic precepts, the author provides sets of prescriptive guidelines for the accumulation and maintenance of wealth. In the chapter on the ‘Seven Cures For A Lean Purse’, Clason lays out seven (7) steps for the acquisition and maintenance of wealth. A ‘lean purse’ in this instance means an empty bank account, if we’re to use contemporary parlance. They are all useful steps when taken into context. I am of the opinion that the application of these 7 steps should take into consideration all of the prevailing circumstances in our financial lives. The author is cognisant of this very fact by admonishing the reader to consider the percentage of income that goes into savings. There are also five (5) ‘laws of gold’ which the author prescribes as the rules governing the acquisition and multiplication of ‘money’, if we are to use our everyday language.
The author touches on other topics such as luck, lending, and planning for the future, also known as insurance, and investment. The storytelling approach taken by the author to expand on these concepts goes a long way of putting into perspective the real life application of these topics. I think that is what makes the book stand out for me. I was particularly moved by the author’s caution against making investment decisions based on the prospects of quick and high returns. It is a fact of life, especially in this fast moving world, that we are prone to fall to conmen who have the ability to entice us with the prospect of the possible highest return on our investments. I think it is important that our investment decisions are guided by the expertise of those managing our investments (and not ‘entrust a brickmaker to buy jewels’), the historical success of the intended investment, and our ability to practice the art of compounding, realizing that the only sure way of accumulating high returns on any stable investment is by allowing as much time go by without interfering with the returns or the capital. The statement just made should disregard my tendency to be skeptical about ‘investment advisors’ or people claiming to know, with certainty, what the future holds. I would rather have stability and a constant accumulation at a lower rate of returns for my investments than a volatile portfolio that could go haywire at any time because of the potential astronomical rate of return. The objective is not to get wealthy in one swoop but rather through a consistent and gradual process.
”Always do the affairs of man change and improve because keen-minded men seek greater skill that they may better serve those upon whose patronage they depend. Therefore, I urge all men to be in the front rank of progress and not to stand still, lest they be left behind.”
One of my personal philosophy that I uphold so dearly is the idea of continuous improvement, or as the Japanese would call it ‘kaizen’. The author does extremely well in underscoring the importance of continuous improvement to our financial growth. The goal, as much as possible, should be to consistently improve in our careers to enable us move at the ‘front rank’. By that, and only that, can we be assured of improving the status of our incomes coming from the work we do. Any investment will require capital. Clason sets out one of the methods of obtaining such capital as engaging in regular 9 to 5 work. The plan is to accumulate as much capital as possible from paid work and invest that capital in ventures that will expedite your retirement from those regular jobs. In the words of Naval Ravikant, “to raise money, apply your specific knowledge….”.
A lot of other pieces of advise are given by the author on range of personal comportment regarding money. I cannot oversell the importance of such a book in this day and age when consumerism is at its peak causing consumers, struggling to provide for they and their families, to deplete their accounts in hopes of satisfying the desires being created by endless corporate advertisements on the internet, billboards, and our televisions. Go through those pages, absorb its contents, and make of it what you will.
I had a complete transformation of mind, for the better, regarding money after my encounter with this book. I would therefore recommend it to everyone, especially young folks about to take on the responsibility of taking care of themselves and subsequently starting a family.