How to be rich (Excerpts from the richest man in Babylon) PART 1

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I finished medical school about two weeks ago and I discovered that life was not as easy as it was in school. I then decided to take my life into my hands. Taking my life into my hands meant I needed to educate myself financially and in other ways. As a way of making myself financial literate enough, I decided to read a financial book a week.

Source

This week I started the richest man in Babylon by George S. Clason. The book was written in the 1920s and I will advise anyone who wants to start being aware of his or her finances to read it. The good thing about this book is that it works with first principles and this is what a lot of people need to excel financially.

In this post, I will be writing about tips on how to have more money according to the book. Stay tuned, you just might learn something.

Tip 1: Pay yourself first

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This is one rule people fail to do instead, they pay others first. They pay tax, they pay the laundry guy, they pay the engineer but they fail to pay themselves. If you want to be rich, you must learn to pay yourself first. The book recommends one-tenth of what is earned be kept aside as pay for yourself. This, therefore, means that before you start attending to any expenses, 10% should be kept aside.
Personally, I keep more than 10% as I don't have so much responsibility asides from taking care of myself. I also don't have debts to pay.

Tip 2: Control thy Expenses

The first time I heard the pay yourself first rule was when I read wealth building by Donald Trump. The first thing that came to my mind was the fact that the whole money earned is not enough and next, I am told to remove ten per cent. This brings me to the point of this tip. Expenses must be controlled and I must say it requires a lot of discipline. Controlling expenses means buying what you need and not what you want. It also means paying for what your funds can cover. No acquiring of new debts.
When controlling expenses, record-keeping helps you track your funds and helps you to know where your funds are going to and this helps with allocation. In summary, make a budget without making it so hard on yourself.

Tip3: Let your money work for you.

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According to the book, this tip is called let your gold multiply. There is this saying that goes like this

No one becomes rich by saving.

This quote is as simple as it is. Now that you know you have to keep 10 per cent of your income. THis ten percent that is being is meant to looked at as a seed that will be watered till it becomes a tree that will bring forth fruits. This therefore means that one has to look for ways the money kept aside to bring more returns. Simply put, it should be invested. One of the problems is that people fear investing because of the likelihood of losing their hard-earned savings. So people shy away from risk and prefer keeping and looking at it in their bank accounts. The funny thing is that after keeping it they later go back and spend the whole savings and they are back to square one. Investing is a topic for another day and investing requires a lot of knowledge which I will cover in my next post.

In summary, to be rich you have to pay yourself first which should be atleast 10%. You need to be disciplined enough to control your expenses and then invest. The greatest way to be rich is by investing wisely.

That should be all for this post right now. In my next post, I will be sharing the remaining 4 tips outlined by this book on ways to be rich.

Thank you for reading.

References

  1. The Richest man in Babylon
  2. Wealth Building 101 edited by Donald Trump

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Thanks for the insightful tips shared here. These past few months, I've been reading a lot on financial literacy and I am happy with the progress that I am making. The third rule appeals to me the most.

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I think the third rule is the way to kick off to riches. However, I feel a tree cannot grow without a seed.

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