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1-Page Summary of The Richest Man in Babylon
Overview
The Richest Man in Babylon is a collection of parables that teach the basics of financial planning. The stories are set during ancient times in Babylon, and they all follow a similar plot: A poor man learns from a rich man how to save money and invest wisely.
A wealthy man named Arkad tells two friends, Bansir and Kobbi, about how he became so successful. He says that as a young man, he was mentored by Algamish (a wise lender). Algamish taught him to save 10 percent of his income and invest it wisely. The author gives several examples of this wisdom in action.
In one story, Arkad is asked to speak at a school about the myth of luck. He teaches that hard work is more important than luck and explains how people can improve their chances through hard work. In another story, the king wants Arkad to teach his people about money management because they’re all very poor. Arkad gives them seven rules for managing money. The first rule is to save 10% of everything you make, and he continues with other rules such as setting up a budget (the second rule), investing your savings so they grow (the third rule), protecting your assets by hiring experts (the fourth rule), owning property (the fifth rule), saving for retirement (sixth) and increasing your earning power throughout life(seventh).
“The Five Laws of Gold” follows a different character from later on in the story, Kalabab. He tells us about a time when he was young and his father told him how to handle money. The advice included five laws: save 10% of your income; invest it wisely; do not spend money recklessly; hire experts for important decisions, and avoid tricksters who try to steal your wealth.
In the story “The Gold Lender of Babylon,” a man who has saved up money for years goes to borrow from a lender. The lender tells him how to decide if he should lend someone money and what factors are important in that decision. The potential borrower must be able to pay back the loan, have a good idea for his project, and put up collateral.
The story of the walls of Babylon illustrates how good planning can help people overcome a crisis. Another parable focuses on Dabasir, who is in debt and sold into slavery, but eventually escapes his masters and returns to Babylon to repay them.
A former slave told a story about his friend who had also been a slave. They both worked hard and saved up their money to buy themselves out of slavery. After that, they started working together in business and were able to make even more money. The former slave’s friend died, but he lived on to tell the tale to Arad Guru’s grandson after giving him some financial advice.
Key Point 1: Everyone should save 10 percent of their income.
Clason perhaps coined the phrase “pay yourself first,” which is surprisingly modern advice. It’s important to save money even while paying down debt and other bills. Clason recommends saving 10 percent of income, which aligns with modern experts’ advice.
The author of this passage is very practical and down to earth. He suggests that 10% savings can be achieved by an ordinary person without much effort or sacrifice. This was made possible by the invention of modern banking, where people’s salaries are automatically transferred into their accounts on a regular basis. So they don’t have to make a conscious decision on how much money should go into which account (savings).
The key to saving money is to make the process automatic. People are more likely to save if they don’t have time to think about it and can focus on watching their savings grow.
