Getting rich is surprisingly simple — and it all starts with grasping one, key concept: Pay yourself first.
That’s what George S. Clason preaches throughout his 1926 personal finance classic, “The Richest Man in Babylon,” a collection of parables from the wealthiest city of the ancient world: Babylon.
Clason opens with the story of Arkad — the son of a humble merchant, of a large family with no hope of inheritance — who grows to become the richest man in Babylon, thanks to wisdom he sought out from a rich money lender named Algamish.
One day, a group of Arkad’s friends decide to consult him. They ask him how he got so rich and how they can do the same.
Arkad tells them what Algamish once told him: Essentially, to save money before spending it, rather than saving money that’s left over.
“Say to yourselves, ‘A part of all I earn is mine to keep,’” he explains to his friends. “Say it in the morning when you first arise. Say it at noon. Say it at night. Say it each hour of every day. Say it to yourself until the words stand out like letters of fire across the sky.”
More specifically, he tells them to set aside a minimum of 10% of their earnings:
Take whatever portion seems wise. Let it be not less than one-tenth and lay it by. Arrange your other expenditures to do this if necessary. But lay by that portion first. Soon you will realise what a rich feeling it is to own a treasure upon which you alone have claim. As it grows it will stimulate you. A new joy of life will thrill you. Greater efforts will come to you to earn more. For of your increased earnings, will not the same percentage be also yours to keep?
Once you’ve made a habit out of setting aside at least 10%, put that money to work, Arkad advises his friends: “Then learn to make your treasure work for you. Make it your slave. Make its children and its children’s children work for you … Invest they treasure with greatest caution that it may not be lost.”
Making your money your “slave” is the modern-day equivalent to smart investing through your employer’s 401(k) plan or other retirement accounts, such as a Roth IRA or traditional IRA. Thanks to compound interest, your savings will grow tremendously over time — the trick is to set aside money regularly and to start as early as possible.
If you still have money left over and are hungry to continue investing, you can research low-cost index funds, which Warren Buffett recommends, and look into the online investment platforms known as “robo-advisers.”
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