Getting Started on the Path to Wealth

In this world, some of us are rich, some of us not so rich. Some of us are lucky enough to be born into wealth, but most of us have to work for it. However, even if you are not currently wealthy, it is always possible for you to get started on the road to wealth.

Last week, I talked about planting a seed of savings, and the numerous benefits that your savings can provide for you, such as a safety cushion, income, and compound growth.

One good book that can help get you in the right mindset and started on the path to wealth is “The Richest Man in Babylon”. This book provides the basic lessons; in fact, many of today’s most famous personal finance books derive at least some inspiration or ideas from the lessons outlined in “The Richest Man in Babylon”. The chapter summaries can even be read for free on Wikipedia.

In this series, I will do a short book review of each relevant point from the book and show how it applies to our world today.

So, why Babylon? As the author, George Samuel Clason describes it, Babylon was one of the first wealthy cities known in history. Through the power of the human mind and spirit alone, men and women came to this patch of desolate land between the Tigris and Euphrates rivers, and through hard work they were able to transform it into a rich city, surrounded by bountiful agriculture and filled with the spice of life.

Chapter One: The Man Who Desired Gold

In this rich backdrop of history, we are introduced to Bansir, a chariot builder, and his friend Kobbi, a lyre musician. The story starts out with Kobbi asking his friend if he could borrow a small amount of money, two shekels. We soon find out that there is no way Bansir could lend that amount, because that is all he has as his entire fortune. Kobbi is shocked at this because Bansir is such a hard worker, and he is skilled at the job he performs.

Bansir and Kobbi go over the times they have shared together, and ponder with amazement and disappointed that even after so many years of working hard, they still have barely anything saved away. There is nothing for them to give to their children or to ease their own burdens in life. As they watched the column of slaves heading to the hanging gardens, bearing goatskins of water, they acknowledged that at least they were lucky to be free.

After pondering the disparity in wealth between the rich and the poor and wondering just what it was that the rich did differently, Bansir resolved to talk to his rich friend, Arkad, the richest man in Babylon.

As I read this chapter, I was reminded of my own self, a few years ago, and of friends that I knew then and now. I remembered what it was like to feel like I was spinning my wheel in place, like a hamster trapped in a cage. I would work hard for a pittance; money would come in, and it would go out the door just as quickly. Whenever I found myself with more money, I somehow found myself spending more as well. New expenses would enter my life, eager to eat up my new cash flow: cars, cell phones, and extra purchases.

I remember feeling that it wasn’t fair that I should have to work so hard just to have all the money go out the door, and I also wondered if there was a better way. I can definitely relate to the situation that Bansir and Kobbi find themselves in.

Chapter Two: The Richest Man in Babylon

Arkad had a lot to tell Bansir and Kobbi. He talked about how he once was also a poor man before he started out on the road to riches. He, too, found himself toiling day after day, with nothing to show for it, until one day he met a rich merchant who helped set him out on the road to riches. It was only after a long period of time that Arkad had built up enough riches to be able to give away to charity, splurge freely, and still not have to worry about having an empty purse. In his opinion, there are laws that have to be observed if one wants to become rich; failure to observe these laws will not only keep poor men poor, but will also impoverish men who happen to become wealthy by luck alone.

According to Arkad, the real turning point was when he decided he would start paying himself first. He recounted how all of his money would leave his purse, and go to pay the merchants, tailors, etc…. and at the end he would have nothing left for himself. Therefore, the first thing he did was to set a portion of his income aside, and he forced himself to reduce his expenses in order to make do with what he had left.

The second important lesson that Arkad learned was that one must know whom to entrust with one’s money. His first investment was with a brickmaker, and it ended up going south when the brickmaker took all of his hard-earned money and bought worthless jewels with them. In Arkad’s opinion, one must seek out the expertise of one competent to give his/her opinion on the matter.

The third lesson that Arkad learned was that you should make your savings work for you. Consider each dollar in your possession as a worker, devoted solely to your cause. When you invest your workers wisely, they have “children”, additional workers that can work for you. If you spend your workers and in the process of spending give them to other people, they are no longer working for you. In turn, if you spend the interest that your workers generate, i.e. their “children”, then their children are no longer working for you as well.

I think this chapter presents basic, timeless financial basics that can be applied in just about any situation. It doesn’t matter how rich or poor you are; to get started on the path to wealth, you need to be putting away at least 10% of your income. To make this really work for you, you need to ensure that you pay yourself first, not last; one way of doing this is by going to your bank and ensuring that 10% of your paycheque is withdrawn and transferred to a savings account before you ever see it in your chequings and are tempted to spend it.

Once you have your savings plan setup, you also need to ensure that it is going to a good cause. If you are taking the extra money and partying hard every weekend, you might be having a bit of extra fun now, but you are missing the point of saving that money in the first place: to plant your tree of savings and to nourish it and grow it! It would be more prudent to place that money in a low-fee indexed mutual fund or another diversified investment which can provide you with high long-term compounded returns. As urban legend holds, Einstein once said that compound interest “is the most powerful force in the universe.” The earlier you get started, the longer that powerful force can work for you with exponential growth and rewards.

In the intro of “The Richest Man in Babylon”, the author makes the point that the financial course of a nation is be related to the progression of the individuals within that nation; I also believe that the fiscal policies of a nation can influence the attitude of individuals, so there is feedback in both directions.

When someone gets started on the road to wealth, that person’s wealth doesn’t just benefit themselves, but it also benefits everyone else as there is more money available for investments and for loans. This wealth compounds and society as a whole becomes wealthier, with more wealth to go around. Conversely, when a nation and its people head down the path of debt, the nation and the people become impoverished and enslaved by their creditors. Look at the world around you and see if you can draw any parallels.

The gate is wide open for all who desire to enter and get started on the path to wealth; all you need is the willpower and the desire! Will you enter the gates, and also learn from the richest man in Babylon?