The richest man in Babylon - How it relates to modern life.
A part of all you earn, is yours to keep.
Those of you are interested in saving to invest, may have heard of a book called ‘The Richest Man in Babylon’ written by George S Clason.
In this series of articles, I shall give my opinion on how I believe this excellent book relates to our modern life.
The main story involves a character called Bansir and his friend Kobbi. They both work very hard for their masters, and are the best in their field, yet never seem to be getting anywhere financially. They are, like many, just getting by.
They eventually seek the counsel of a man called Arkad who they have known since childhood. Arkad has become wealthy, even though he started with virtually nothing, as did they.
To cut a long story (well, it’s not that long) short, Arkad teaches them ‘7 cures for a lean purse’
The first one, ‘start thy purse to fattening’.
The book doesn’t clearly say whether or not the 1/10th or 10% of all you earn, should be taken from your gross income, or your net income. I would imagine that the people of Babylon were subject to tax, in a similar way that we are. I doubt though, that they had the complications of salary sacrifice schemes, pension, shares, and childcare vouchers to complicate matters though. Rather a standard set figure tax, that everyone must pay, regardless of their earnings.
Originally I took this as I should save 1/10th of earnings net, after all my stoppages had been deducted. This seemed a much fairer way to do it, as I surely had no control on the tax and national insurance that I had to pay. I did however, have control over the remainder. I counted my pension contribution as part of the portion, and then topped up the rest to 10% of net and placed in a savings account. This was not really that painful at all, as I am fairly ‘frugal’ anyway.
However, on reflection, the people of Babylon would not have had these luxuries, therefore I feel that you need to be saving 10% gross as they would.
Saving 10% gross is obviously harder to do and will require some careful planning and restructuring, but will ensure that you stay true to the first ‘cure’.
If you can achieve this then you can count any pension or share scheme that you pay into as a bonus, and be smug in the knowledge that in reality you are saving much more.
This will ‘start thy purse to fattening’ and start you nicely on your way in your financial quest.
Do you think the story is referring to saving 10% net or 10% gross?
In my next article I will discuss a modern take on Arkad's second ‘cure’- Control thy expenditure.
Thank you for reading.