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Sunday, March 6, 2016

Book Review - The Richest Man in Babylon by George S. Clason

This book is a highly recommended reading in the area of personal finance. It's a great book that goes deeper into the way some very basic and simple principles of personal finance can be used to become financially free.

The book basically dwells upon what it calls as "Seven Cures for a Lean Purse" and then suggest ways to turn a lean purse into a fat purse. Acquiring fat purse in this context means becoming rich.

Here are some excellent paragraphs from the book that also summarize the purpose and some of the key lessons for its readers.

The First Cure - Start thy purse to fattening

For every ten coins thou places within thy purse take out for use but nine. Thy purse will start to fatten at once and its increasing weight will feel good in thy hand and bring satisfaction to thy soul.

This, my students, was the first cure I did discover for my lean purse: For each ten coins I put in, to spend but nine.

The Second Cure - Control thy expenditures

Therefore, engrave upon the clay each thing for which thou desireth to spend. Select those that are necessary and others that are possible through the expenditure of nine-tenths of thy income, Cross out the rest and consider them but a part of that great multitude of desires that must go unsatisfied and regret them not. 

This, then, is the second cure for a lean purse. Budget thy expenses that thou mayest have coins to pay for thy necessities, to pay for the enjoyments and to gratify thy worthwhile desires without spending more than nine-tenths of thy earnings.

The Third Cure - Make thy gold multiply

Gold in the purse is gratifying to own and satisfieth a miserly soul but earns nothing. The gold we may retain from our earnings is but the start. The earnings it will make shall build our fortunes. I tell you, my students, a man's wealth is not in the coins he carries in his purse; it is the income he buildeth, the golden stream that continually floweth into his purse and keepeth it always bulging. That is what every man desireth. That is what thou, each one of thee desireth; an income that continueth to come whether thou work or travel.

This then is the third cure for a lean purse: to put each coin to laboring that it may reproduce its kind even as the flocks of the field and help bring to thee income, a stream of wealth that shall flow constantly into thy purse.

The Fourth Cure - Guard thy treasures from loss

Misfortune loves a shining mark. Gold in a man's purse must be guarded with firmness, else it be lost. Thus it is wise that we must secure a small amount and learn to protect them before the Gods entrust us with larger. 

This, then, is the fourth cure for a lean purse, and of great importance if it prevent thy purse from being emptied once it become well filled. 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. Consult with the wise men. Secure the advice of those experienced in the profitable holding of gold. Let their wisdom protect thy treasure from unsafe investments.

The Fifth Cure - Make of thy dwelling a profitable investment

Then will thy heart be glad because thou wilt own in thy own right a valuable property and thy only cost will be the king's taxes. Thus come many blessings to the man who owneth his own house. And greatly will it reduce his cost of living, making available more of his earnings for pleasures and the gratification of his desires.

This, then, is the fifth cure of the lean purse: Own thy own home.

The Sixth Cure - Insure a future income

Therefore do I say that it behooves a man to make preparation for a suitable income in the days to come, when he is no longer young, and to make preparations for his family should he be no longer with them to comfort and support them. He should plan certain investments or provision that may endure safety for many years, yet will be available when the time arrives which he so wisely anticipated.

This, then, is the sixth cure for a lean purse. Provide in advance for the needs of thy growing age and the protection of thy family.

The Seventh Cure - Increase thy ability to earn

In learning to secure his one definite small desire, he hath trained himself to secure a larger one. This is the process by which wealth is accumulated: first in small sums, then in larger ones as a man learns and becomes more capable. As a man perfecteth himself in his calling even so doth his ability to earn increase.

Thus the seventh and last remedy for a lean purse is to cultivate thy powers, to study and become wiser, to become more skillful, to so act as to respect thyself. Thereby shalt thou acquire confidence in thy self to achieve thy carefully considered desires.

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