The Richest Man in Babylon by George S. Clason is easily one of the most popular books on personal finance, and it has truly stood the test of time. Published in 1926, it’s still read and recommended over and over again to this day.
The book promises to deliver the “secrets to personal wealth” but does it live up to the hype?
In this review and summary of The Richest Man In Babylon, I’ll help you decide whether it’s worth picking up. Stay tuned for a breakdown of the key lessons told in the book, the pros and cons, and more.
Key Points 🔑
- Overall rating:
- Publish date: 1926.
- Author: George S. Clason
- Pages: 102. (Will vary based on the copy you buy)
- What’s it about? The fundamentals of building wealth and handling your money wisely.
- Who’s it for? Beginners to personal finance or anyone interested in getting a refresher on the fundamentals in a fun, interesting, entertaining way.
- Key lessons: Pay yourself 10% or more. Put 20% toward debt. Never spend more than 70% on expenses. Work hard and invest your money wisely.
About the Author
George Samuel Clason was an American entrepreneur and author born in 1872. He founded two companies, but is most famously known for the series of informational pamphlets he wrote about thrift and personal finance in 1926. The financial lessons he shared in the pamphlets were told through fictional stories based in Ancient Babylon, and the most popular were compiled and published in his book, The Richest Man in Babylon.
Fun fact: George S. Clason is credited for the coining of the phrase, “pay yourself first,” which is still one of the most popular (and effective) pieces of personal financial advice to this day. What a legend.
What Is the Richest Man In Babylon About?
The Richest Man in Babylon is about, as the title suggests, a very rich (but fictional) man who happens to live in Babylon. That man’s name is Arkad, and in the book, he shares his secrets to building and keeping wealth.
The book also shares stories and tales from other fictional characters, all with underlying lessons of personal finance including paying yourself first, controlling your expenses, investing wisely, paying your debts, and enjoying your work.
Although the book was published back in 1926, the lessons in it are still relevant to this day, and will be relevant for the foreseeable future.
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Who Should Read It?
- Beginners to personal finance who want to learn the fundamentals of building and keeping wealth.
- Anyone who wants a fun and entertaining refresher of the basics of personal finance.
Summary of The Richest Man In Babylon
Pay yourself first by setting aside at least 10% of your income. Pay off any debts you may have with 20% of your income. Never let your living expenses exceed 70% of your income.
With the money you save, protect and invest it wisely by doing your research and seeking the advice of others. Don’t give into get rich quick schemes or invest your money in things you don’t fully understand the risks.
Finally, treat work as your friend and find purpose and meaning in what you do. Opportunity seeks action takers, and by continuing to learn and improve at your craft, you’ll be able to make more money to better your life and the lives of those around you.
8 Key Lessons from The Richest Man In Babylon
1. Pay yourself first: Save 10% of everything you earn
“Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade.”– George S. Clason (p. 18)
This is the first and most important key principle of wealth building told in The Richest Man in Babylon. You’ve probably heard it before too because to this day it’s still one of the most common pieces of financial advice passed around on the web — and for good reason.
But what does “pay yourself first” actually mean?
It simply means that every time you get paid, before you pay anyone else (e.g. your internet service provider, landlord, grocery store, clothing shop, etc.), set aside some for yourself. This book recommends 10%, but you can always set aside more if possible.
This is how you’ll start building your tree of wealth. Do it for long enough, and you’ll build up quite a nice sum.
Seem too simple to be effective?
As Arkad would say, “Deride not what I say because of its simplicity. Truth is always simple” (p. 27).
2. Create a debt payoff plan: Contribute 20% of your earnings
While The Richest Man In Babylon doesn't discourage taking on debt if it's for a wise purpose, it does discourage ignoring debt and not paying it promptly.
If you ignore debt, it'll only grow into a bigger monster.
Luckily, with a plan, you can make paying off your debts a less painful process. And if you follow the strategy in the book, you can build wealth at the same time.
Here’s how it goes:
- Make a list of all of your debts – Getting organized is always the first step!
- Call up each of your creditors and explain your situation – Tell them how much you owe in total, how much you can afford to pay them each month, and how long it should take to pay them back in full. Most will be willing to hear you out if you know your numbers and have a solid plan. They may even be willing to help you.
- Contribute at least 20% of your earnings to paying off your debts – The book recommends just splitting it equally amongst all your debts. This can work fine, but there are other debt payoff strategies (e.g. debt snowball, debt avalanche) that are worth looking into if you want to be more efficient.
A personal note: The Richest Man In Babylon recommends continuing to pay yourself 10% of your income even while paying off debt. That way, you still have “money to jingle,” which can be motivating and uplifting.
While I think this is a good idea if you're paying off lower interest rate debt (5% or lower) like a mortgage, when it comes to high-interest debt (5%+) like credit cards, I think it's best to put as much money as you can into that debt in order to pay it off as soon as possible. That way you'll save you a good chunk of change in interest payments.
Debt-free? Congrats! Increase your “pay yourself first” payments to 30% and watch your savings skyrocket.
3. Control your expenses: Never let them exceed 70% of your income
“What each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary.”– George S. Clason (p. 28)
Because you’re paying yourself 10% of everything you earn and putting 20% toward debt (or more savings), you can never spend more than 7/10ths of your earnings.
But what if 7/10ths isn’t enough to cover your necessary expenses?
In that case, you’ll need to find ways to cut back.
(Don’t think you can cut back anymore? Refer to the quote above, try again, and then if you still can’t find ways, it’s time to earn more money)
The thing is, sometimes what we think are our necessary expenses are really just things we want — not things we need to survive or be happy. And if we try to buy every little thing we want, we'll never have enough money left to spend on the things we truly love.
The solution? Budgeting.
A good budget will help you afford the things that bring you the most joy, while avoiding the things that seem cool or fun at first, but fade later on.
In other words:
A good budget will improve your life, not make it worse.
To get started, analyze your past purchases and start tracking all of your future expenses (personal finance apps can help with this).
Once you have a good view of where your money is going, it'll be easier to find areas you can cut back. Continue doing this every month, and adjust over time.
“Let thy motto be one hundred percent of appreciated value demanded for each coin spent.”– George S. Clason (p.28)
4. Let your money work for you and multiply itself
“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.”– George S. Clason (p. 29)
After saving 10-30% of everything you earn, instead of keeping it in a savings account where it’ll be earning close to nothing (or even losing money due to inflation), it’s important to put it to work.
Think of each dollar as your own little employee. Your dollars can earn you more dollars, and the dollars your dollars earn can earn you more dollars, and so on.
This is the magic of compound interest.
By taking advantage of this magic, your money will multiply more and more over time, and your wealth will grow exponentially.
This doesn’t come without risk though — that's why the next lesson is so important:
5. Guard and protect your money
“Better a little caution than a great regret.”– George S. Clason (p. 66)
With any investment, there’s always a bit of risk involved. As an investor, it’s your responsibility to manage that risk to make sure that you protect your initial investment (i.e. the principal) as well as possible.
It’s also your goal to make sure the money you invest makes money, or, as it’s put in the book, “collects a fair rental.” There’s no point in risking your money for no reward.
Here are some tips from The Richest Man In Babylon to help you protect your money:
- Don’t fall for get rich quick schemes. In most cases, opportunities that promise quick, easy, and large returns will result in quickly lost money.
- Do your research. What dangers come with the investment you’re thinking of? What are the chances you’ll lose your principal? What are your expected returns if the investment works out well? These are all things you should consider before investing.
- Seek advice from those more experienced than you. Even if you’ve done your own research, getting advice from someone more experienced than you (e.g. in the sector you’re planning to invest in, or just with handling money for profit in general) is a good idea. Sometimes inexperience or emotions can make us blind to obvious risks.
- Diversify – By investing in multiple areas/companies/industries, your overall portfolio will be less impacted if one investment happens to go sour.
6. Own your own home
The Richest Man In Babylon lists out multiple reasons why owning your own home is a good idea both financially and generally:
- Improved quality of life
- You can grow your own food
- More freedom
- Reduced cost of living
The question is: Is this all true?
Well, as you probably know, owning a home vs. renting is a heavily debated topic in the personal finance world. There are pros and cons to both.
I agree that owning a home provides more freedom as you can modify the house however you like, but the other points above are debatable.
- Rentals can still provide a good quality of life.
- You can still grow your own food and plants in a rental.
- And finally, in some cases, renting can be cheaper than owning.
In the end, what's best for you all depends on your situation and where you live.
Just remember: a home that you live in, that doesn’t produce any income, is more of a liability than an asset. It doesn’t make you money, it costs you money. And even though it may appreciate in value, it may also do the opposite.
7. Save and invest for retirement
As you get older, you’ll probably want to (or have to) relax a bit more, and your active income will take a hit. That’s why it’s important to start building up a nest egg and some alternative income streams that you can rely on in your retirement days.
This can be done by:
- Investing in stocks and bonds – You’ll want to adjust your portfolio as you get closer to your retirement years. There are specific accounts set up for this these days in most countries (e.g. 401k or IRA in the U.S., RRSP or TFSA in Canada, etc.).
- Purchasing and renting real estate.
- And building other passive income sources.
This is why lessons #4 and #5 above are so important. You need to start putting your money to work early, and safely, while you can, so that you have some money + income to rely on when you no longer can/want to work.
8. Improve your skills and earn more money
“The more of wisdom we know, the more we may earn.”– George S. Clason (p. 36)
One of the best ways to improve your financial situation is to learn how to earn more money. That’s why it’s such a big focus here on Swift Salary. It’s also the final key lesson told in The Richest Man In Babylon.
Here’s a quick summary of the tips told in the book:
- Have the desire to increase your earnings. Without a strong desire you won’t get anywhere.
- Start small, but be specific. By accomplishing a small, specific, reachable goal (earning an extra $100), you’ll work toward larger goals (earning an extra $1,000 a month).
- Focus on one thing at a time. Too many goals will just overwhelm you.
- Master your craft. The better you are at what you do, the more you can earn. To make this easier, find work that you’re interested in and that you can concentrate on for long periods of time. The more effort and persistence you put into learning and mastering your craft, the better you’ll get and the more you’ll earn.
- Make work your friend – Those who take action and make work their friend are the ones who attract good luck and opportunities. Procrastination is the killer of good luck.
The Richest Man In Babylon Review and Rating
The Richest Man in Babylon is a great book. The stories told throughout it are entertaining, and the lessons of thrift and personal finance within the stories are just as relevant and applicable today as they were when the book was originally published in 1926. If you want to learn the fundamentals of building and keeping wealth, this book is the perfect place to start.
Pros and Cons
- Timeless lessons – Pretty much everything in the book is still relevant to this day. George S. Clason perfectly breaks down the fundamentals of personal finance.
- Great storytelling – The stories in the book are really what make the lessons stick, and they make the book entertaining to read.
- Quick read
- It may be hard to read for some – The old-English style of writing won’t be everyone's cup of tea.
- Repetitive – The same lessons are repeated multiple times in different ways. Although I see this as a good thing as it makes the lessons more memorable, some may not like it.
- The lessons are basic – If you’re looking for an advanced guide to making money, saving money, and investing in the modern-day, this ain’t it!
Should You Buy It?
Although I’ve summarized the main lessons from The Richest Man in Babylon above, I still highly recommend picking up this book and reading it for yourself. There are a ton of great quotes that I couldn’t share, and the storytelling in the book is what really makes the lessons resonate.
That said, if you’re already well-versed in the basics of personal finance, most of the lessons in this book probably won’t be new to you. That doesn’t mean it’s not worth a read though. It’s still a fun refresher with some great storytelling!
Where to Buy The Richest Man In Babylon
I’m really glad I finally got around to reading The Richest Man in Babylon. I think it delivered perfectly on it’s promise.
It teaches the fundamentals of wealth building — paying yourself first, putting your money to work, divvying up your money for wants, needs, and debts, and working hard to earn money — in a fun, educational, and motivational way.
I hope you enjoyed this summary and review. If you found it really helpful, please consider sharing it!