MBA1983 Must Read: The Richest Man in Babylon By George S. Clason

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I want to begin this must read episode by saying that in my personal opinion, this book is a must read. It is incredibly powerful. It's a great reminder of the fundamentals of finance, but it is not the end all and be all of finance for business or for your life. But I will say the fundamentals are sound and if you just follow what this book says, you're going to be all right. At least that's my guess. I'm not a financial expert, so of course when it comes to any kind of financial advice, speak to your financial expert accountant and share with them what you learned on this episode before you make a move. So Arkad, the main character of the story, actually sits down with his buddies in town who wonder, hey, how did you become the richest man in Babylon? And he shares these seven rules, these seven cures to poverty because he was poor himself and he made his way to riches. As a side note, one of the things I really enjoyed about this book and kind of got a giggle here and there because of it, was the fact that a lot of it is written in Old English because it's supposed to be taking place a thousand years ago. So these seven rules are written in sort of an Old English style. So the first rule is start thy purse to fattening, meaning you need some money to make money, okay, you need to start having some money in the first place. That's the first rule. Most people, Arkad says, happen to spend exactly as much money that they make. His advice is to dedicate 10% of your wealth of your income to a savings or a savings account. And he says 9, 10 of your money. The money that you make is yours to spend as you like, but 1/10, you're putting it aside. So basically he's saying save some money, but do it systematically. 10% every single month is a good practice in today's practical world. And you can easily do this with most banking apps where you can just give a transfer or set up a a monthly transfer from your checkings to your savings, or even allocate a bucket. Some of these apps have separate buckets or separate accounts for different reasons. And if you just do it automatically, 10% of your money in your account automatically gets deducted and moved to that other account, the savings account. And many people choose to do this on payday or the day after payday. So they pay their savings account or pay themselves first before they pay any bills. Now, what he says in this chapter is that something surprising happens. It's almost like a miracle. Your life really doesn't change. It actually doesn't affect your lifestyle too much. If you make $5,000 a month and you put away $500 every single month, for some reason, your life does not change. 4,500 is just as much as 5,000. 10% is small enough for you not to really feel affected in terms of your lifestyle, but big enough to make a significant difference. So rule number one, allocate 10% to savings every single month. Rule number two, control thy expenditures. This means spend less than you make. Or as he put it, don't spend needlessly. Don't buy things you don't really need. Get in the habit of living below your means. This will give you a lot more wiggle room. This will give you a lot more personal confidence and comfort in your finances. I talk about this all the time. When it comes to transitioning from a job to a full time entrepreneurship lifestyle, you can really benefit and feel more comfortable in that transition if you lower your expenses because the pressure is not as high as it used to be when it comes to paying bills. Rule number three, make thy gold multiply. This means take that money that you're saving, the 10% every month and invest wisely. Invest in things that you know you have a good chance in making a profit. This could be an index fund. This could be your own little business or side business. This could be saving up for maybe a down payment for an investment property. The point here is that don't let that money sit in your account forever until you're like 50, 60, 70, 80. Because the power of the dollar, even back then, 8,000 years ago, depreciates. Or this is what's called inflation. A dollar today doesn't have the same value as a dollar ten years from now. What you can buy with a dollar today is not the same as what you could buy 10 years from now. Or you can look at it in terms of in the past, right? I remember when I was a kid, I had a dollar in my pocket. I can walk out of the convenience store with maybe four or five different purchases, right? You could buy things for 25 cents today. Really hard to do that. So take the money that you're saving and invest wisely. Is rule number three. Now rule number four goes hand in hand with rule three and it's guard thy treasure from loss. This means you got to be very careful about investments that are just flat out bad investments, investments that seem too good to be true investments that you don't understand, or trusting somebody that maybe is not an expert at that line of work. He gives that example in the book where he lost all his savings after he saved for a year doing the 10% thing to somebody who promised him that he was going to come back with some really fancy jewels. But that person that he gave the money to was not a jeweler. Therefore they got swindled and got sold a bunch of glass. He thought he was being smart. I'll buy some jewels, I'll resell them for a profit. But the problem is that he invested in somebody that didn't know what they're talking about. Be careful. There's a lot of scam artists out there. There's a lot of people promising a lot of different things online. Do your homework, do your research, do things that you understand and have proven to work not just for people on the site or on the call, but people that you know and have met and you can speak to. Number five, make thy dwelling an investment. This one is pretty simple. Arkad in the story recommends that you should own your own home, that where you live should be something that you actually own. Because if all else fails, at least you have your house. Now, mind you, owning your home means actually owning your home, not having a mortgage, because if you don't pay your mortgage, the bank really owns the home right now, I'm not Saying, don't get a mortgage. I'm just saying understand that the goal here is to actually own your home outright. And maybe your way to do that is to get a mortgage. Now, there is a lot of different differences of opinion when it comes to how you spend your money and if home ownership and buying a home where you live in is a good investment. But this is what the book shares and I'm just sharing you the advice it shares. But you may want to do some research on this one in particular, because in some cities around the world, it actually doesn't make much sense to actually own the home that you live in versus renting and taking the difference of that money and investing in something a little bit more profitable. You can find a ton of research on the 3x rule and all kinds of different kinds of formulas you can do on YouTube to find out if buying your own home in your city, in your town, makes sense and is a solid investment. Number six, ensure a future income. And this has to do with the fact that Arkad was thinking about people in his family, in his life that will be around even once he's gone. So he's really thinking about life after his death. What is he going to offer these people, his family, his loved ones, when he doesn't have an income or money coming in anymore because he's not around? This is kind of a learning that you can see in different ways. You can extract the fact that, hey, maybe life insurance is a good idea to ensure that your loved ones are taken care of even if you die suddenly or later in life, depending on, of course, the terms of the life insurance policy. The other thing that might be being taught here is having a will. A lot of people forget that creating a will is actually pretty, pretty easy. It's actually a pretty easy process for most people. It's not an expensive thing. A few hundred dollars, a lot of lawyers will do it for you and basically ensures that, hey, if God forbid, something happens, your loved ones are protected and your hard work is passed on to them and your income and things like that. So that way your family, your legacy lives on and so does your finances. And the last and most important golden rule is improve thy ability to earn. What does this mean? Well, how do you make your money right now? Okay, whether you're an employee, whether you're a self employed person or you run a big business, you earn the money that you make right now based on the value you add to the marketplace, the value add to your company that you work for or the company you're building. So if you want to increase the money that you make or increase the revenue you're making, you got to increase your value. You got to improve or as Arkad says, strive to be wiser and more knowledgeable. The more you invest in you and becoming better at what you do, the more valuable you become and the more you actually can demand for your work. In fact, you probably won't even need to demand it, they'll just give it to you. As this book illustrates. What this book is really trying to convey to you in general is the laws of money have not changed over the years. It's kind of like gravity. Money in the world is not a fixed amount. Everybody can achieve wealth, but it requires a lot of discipline, dedication, focus, hard work, as you can see from the rules. And most people don't want to do that. They want to just coast. If you want wealth like Arkad wanted wealth and wanted to become the richest man in Babylon, then you're willing to sacrifice the comfort in the short term to gain that wealth for the long term. USAA knows dynamic duos can save the day like superheroes and sidekicks or auto and home insurance. With usaa, you can bundle your auto and home and save up to 10%. Tap the banner to learn more and get a'@usaa.com bu restrictions apply. So to wrap up this must read episode, I want to give some rapid fire takeaways. My favorite takeaways from this book. First of all, this whole book is based around somebody who's been there, done that, and actually Arkad, the main character, sits down and shares his knowledge with many people from the town. But it all started because one person asked Arkad, hey, how did you become rich? And when Arkad answered, he said, hey, I'm happy to share this information, but why don't I share it with everybody so everybody can benefit? But the point that I got out of this was you don't get what you don't ask for. You got to ask questions. You got to not be afraid to ask questions. There are people that are happy to share how they got where they are and they're willing to share it if you just ask. The other major takeaway is that this book really reinforces the fact that you can never become wealthy if you don't have a way to continuously be earn income without your involvement. What does that mean? If you're working day and night, night and day at a job or even in your own business and you can't step away from it at all for a long period of time, like a month, for example, then you're really a slave to that. And once you stop doing that or showing up to your business or showing up to your job, your income will stop coming in. Real wealth is wealth that continues to come in. An income that fills your purse, right, regardless if you are involved or not. This is what's called passive income today, and this is what this book really defines as wealth. This is the goal we all should be striving for, whether that's through real estate investing, whether that's building an autonomous business that works without us, whether it's creating a business to a certain point where we sell and then we have enough money to take on and live off that wealth, or take a big chunk of it and invest in something that gives you passive income income. That's the point. Passive income is the key here. We want to make sure that our purses are continuously being filled regardless if we are around or not. And one of my final favorite takeaways is don't take advice about finance from a bricklayer. Don't take advice about landing pages from a taxi driver. Don't take advice about the best route to the airport from a marketing expert. The point here is when you ask for advice, when you seek advice, when people are giving you advice, you have to question the source. Is this the best person to give this advice? Is this the person with maybe the most authority or the most knowledge or wisdom or experience in this area? If not, find that person. Because that's really a shortcut to a lot of success in life. This is why I do this podcast, because I want to be able to share what I know about building a business, what I've learned over the years, because I've been there. I've been where you are today, along the path, and I want to share with you how to get around and navigate those potholes and how to improve yourself along the way so that you can build the business you want and become the entrepreneur you want to become. Thanks so much for listening to the $100 MBA show. I hope you enjoyed this week's must read episode on the Richest man in Babylon by George S. Clason. I highly recommend you pick up this book. It's available on Kindle, it's available on Audible. If you like listening to books. It's only a four hour book so you can read it pretty quickly between your commute or your exercise session. It's a great read that wraps up today's lesson, but make sure you hit subscribe or follow on your favorite podcast app to make sure you don't miss any upcoming episode. Like tomorrow's episode where I share with you the Fire Yourself Experiment. We're going to do a little experiment together where we're going to lay out what do we need to do to totally remove yourself from your business and have your business not only survive but thrive. Imagine your business being totally automated where you can take a three month vacation and it's still going strong. What needs to be true for that to happen? Well, that's what we break down in tomorrow's lesson. So make sure you join me on that lesson tomorrow. Before I go, I want to leave you with this. One of the best pieces of advice I've gotten was from Jim Rohn and he says that you should always seek out the classics, the books, the materials, the speeches that have lasted the test of time. You will always find wisdom. You will always find something good, a nugget of wisdom that you can take and implement in your own life, in your own business. I'm always reminded of this when I read a classic like the Richest man in Babylon. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care. We've all been there. You hold onto a coupon but forget about it and suddenly it's Expired. Expired in2012. Dang it. Fortunately, by switching to Geico, you could save about $900 on car insurance without ever touching a coupon. It feels good to save big. It feels good to Geico.