Even a rich man's pocket will become empty as he spends.
The best way to measure wealth, therefore, isn’t by how much someone has saved, but
by their incomes.
All of this, in turn, depends on one’s attitudes and mindset.
My name is Seiiti Arata, founder of Arata Academy and today, I’m sharing with you
the annotated summary of George Clason's The Richest Man in Babylon.
This is a very personal interpretation of the book.
I’ve purposely left out passages that I don’t agree with very much, and given a
greater emphasis to the points that I identify with.
Click on this link to access the free e-book available from the Arata Academy: https://arata.se/babylon
If you want to find out about a surprise that I’m offering, and would like more information
on the e-book, keep watching this video until the end.
The beginning of the book introduces us to two characters who decide to learn how to
become wealthy.
They go straight to Arkad, the richest man in Babylon, looking for advice.
What’s interesting is that eventually, they became friends with Arkad.
They studied together, played together.
At no point did Arkad appear to be smarter or more skilful than the two characters.
When they looked back at the time they spent with Arkad, they couldn’t remember seeing
him, the richest man in Babylon, working any harder than anyone else.
So, what was his secret?
Arkad, the richest man in Babylon, begins to share his story.
Before coming to the answer, there are three initial assumptions that need to be taken
into account – take a minute to write them down.
First assumption.
To enrich, it’s necessary to understand and practice the universal laws of enrichment.
There are two types of people who don’t accumulate wealth: those who don’t understand
the laws of enrichment and those who, despite their understanding, don’t respect these
universal laws.
It doesn’t matter what you know, what’s important is what you do with the information
you have.
Knowledge without action is useless.
That's why in our financial enrichment course, Truly Wealthy, we teach practical concepts
that’ll help you to change your behaviour.
Second assumption.
Wealth is good
Wealth is a catalyst for life.
When you’re wealthy, it’s easier to experience life more fully.
I usually say that wealth is like an amplifier.
People with good intentions will do more good things.
People with evil intentions, unfortunately, do evil.
So, for good people, it's good to get rich.
It’s necessary to see the positive potential that we could achieve if we were wealthy,
in order to set the goals that’ll make us wealthy.
I mean, you have to.
Without a clear intention, nothing will fall into your lap.
Where there’s a will, there’s a way.
Third assumption.
It takes time and study
Everyone has time.
It's a matter of how you prioritise it.
When I mention study, I mean you need to know how to look for information.
How did Arkad study the laws of becoming wealthy?
Through a master.
As the story goes, Arkad wasn’t rich at first.
He had nothing, just like the two friends who asked him for advice.
To be able to pay his bills, he got a job as a scribe and the work was just enough to
pay for his food each day.
One day Algamish came along.
He was a very rich man who asked for an impossible service to be carried out on time.
Arkad agreed that he’d work all night long to deliver the project, and in return, Algamish
would tell Arkad how to become wealthy as well.
Make a note of the advice that the richest man in Babylon received in exchange for his
work:
Out of all the money that you earn, a part of it is YOURS to keep.
This is the advice he received from Algamish and, with it, Arkad became the richest man
in Babylon.
Of all that you earn, one part is yours.
To save.
But wait a minute, what do you mean?
If I get my monthly salary, isn’t it technically all mine?
No.
Because a big chunk of it goes straight on rent: the money belongs to your landlord.
A part of your salary goes towards paying for a health plan, and so the money belongs
to the administrator of the plan, to the doctors.
One chunk of it is spent on clothes and hence the money is not yours, it belongs to the
shop owner.
One part goes towards the financing of your car, so the money isn’t yours, it belongs
to the dealership.
To become wealthy, we need to save a part of what we earn.
Under no circumstances, therefore, spend more than you earn.
In fact, the richest man in Babylon suggests that you save at least 10% of everything you
earn.
If possible, save more than 10%.
If every year I can save 10% of what I earn ... how much would I have after ten years?
Some might say that I’d have the equivalent of a year's salary.
But that’s not true.
We can make money work for us.
We can invest.
Over the ten years, our savings will multiply.
Now ... be careful!
When it comes to investing, trust your money in the hands of those who understand things.
In the first year of his investments, Arkad gave all his money to a friend who was BRICK
MAKER.
He planned to travel through Phenicia to buy jewellery and resell it.
It seemed like a good plan, but there was one downfall: the brick maker didn’t understand
anything about jewellery at all.
He was conned by the Phoenicians, who gave him pieces of stained glass in return for
their savings.
They lost everything.
Have you ever heard of a similar story in our day and age?
About someone who ventures into an area that they know nothing about, and they end up losing
everything?
At least Arkad had already gotten into the habit of spending less than he earned.
For the next twelve months, he continued to save and found a better investment: buying
brass for a shield manufacturer.
We can clearly see how Arkad's wealth has progressed: First, he saved a portion of what
he earned by at least 10%.
Then, he found a good investment.
But there’s still an important piece of the puzzle that’s missing.
The profit that Arkad made from investing in bronze was being spent on lavish banquets,
drinks and clothing.
He was wasting all of his profits.
His mentor, Algamish, scolded him and Arkad quickly learned that the fruits of his work
could be planted to produce even more fruit.
Isn’t it simple?
To get rich, you must first want to.
Then, you have to put everything you’ve got into learning and, finally, practice what
you’ve learnt.
Why do we have to learn and practice?
If you have access to our financial enrichment course, Truly Wealthy, you’ll have seen
that we have over 30 specific classes with interactive activities to help change your
behaviour, and therefore reap better results.
The Richest Man in Babylon is just one of the hundreds of references we used to produce
the Truly Wealthy course for you.
So, in today’s simple video about The Richest Man in Babylon, I want you to at least understand
something very basic.
The three commandments.
Write down: Three commandments.
FIRST COMMANDMENT
1.
Spend less than you earn.
At a minimum, save 10% of what you earn.
If you can, save more, but don’t forget to still enjoy your life.
It’s all about finding a middle ground.
If you try and save all of your money, you’ll end up giving up halfway.
To control our spending, we have to understand that desires are infinite.
It’s only natural that as we earn more, our expenses increase: we want a better car,
a bigger house, better clothes, to go to better restaurants.
This behaviour will lead anyone to ruin, no matter how rich they may be.
Why is that?
Because desires are infinite.
There’s always going to be something new, more expensive, that we’re going to want
to buy.
Before you buy anything, always think of the rule of spending less than you earn.
This is how we set the spending for our desires, and also content ourselves with living a life
in which desires might not be fully satisfied.
There is a type of expense that falls into a special category - mortgages.
A piece of advice is to try and own your own home, so that you don’t end up spending
your life paying rental fees.
This piece of advice is something that needs to be evaluated carefully, as it’s not an
absolute rule.
Firstly, there’s no point in taking out a mortgage if the interest rates are ridiculously
high.
It might make more sense to rent for longer until you find a fair price.
Here’s another thing to take into consideration: more and more new generations want mobility.
Buying the first property they see might stop them from being able to meet new opportunities
in their lives.
On the other hand, when the property is well chosen, usually in an area that is lacking
in infrastructure and benefits, and therefore has a good potential for greater urbanisation,
it’s a type of investment that tends to value a lot.
A well-maintained property can be a valuable financial asset.
SECOND COMMANDMENT
2.
Make good choices.
Just consider counsels of people who know what they’re talking about.
From experienced and well-meaning people.
Don’t waste your money.
As you become wealthier, you’ll come across a lot of "unmissable" opportunities.
Instead of being enchanted with the possibility of incredible gains with a high amount of
risk, choose lower risk opportunities.
Although they might offer smaller gains, at least they’re certain.
Investments with good liquidity are those that you can drop out of when you need to.
You know, in life, we will be exposed to many opportunities.
Do you know what a PROCRASTINATOR is?
A procrastinator someone who puts things off, someone who spends their time doing less important
things in order to avoid the most important ones.
They let opportunities pass, leaving them for later.
They tell themselves that they don’t have the time to do them.
The Richest Man in Babylon teaches us a really interesting lesson about productivity.
One of the biggest setbacks in our finances is our lack of decision-making abilities.
There are opportunities that don’t come around often: we need to know how to analyse
them and grab them before our circumstances change.
Not deciding anything is also a decision… and it might just be the worst decision out
of all of them.
Without having absolute control of our habit of procrastinating, we fail to master this
enemy.
Let's think: no-one leaves the front door open on purpose and invites thieves into their
homes.
Right?
So why is it that often, we’re happy to waste our time with uselessness?
Doing things today that’ll only cause us problems tomorrow ... and leaving things that
could begin today for another day?
This is a question that we need to reflect on.
THIRD COMMANDMENT
Invest your savings so they bring results.
Replant the fruits.
Choose low risk investments that provide definite profits.
Avoid losing money in risky operations, scams that offer astronomical gains with little
effort.
Avoid investing in things that you don’t understand.
First, acquire knowledge.
Building on the idea of ​​spending less than you earn, there’s another idea that
I like a lot.
Increase your ability to earn more.
One of the most direct ways to do this is to seek excellence.
Whatever your job, it’s always possible to examine the results of other colleagues’
work and to understand which are reaping the best results.
Usually, they’re those who work harder, with more passion, more persistence, more
curiosity, more interest, more ethics, more concentration.
The commitment to these factors is rewarded over time and allows for greater recognition
and more fruit to harvest.
Look ... It’s always possible to improve the quality of our services, the price of
our products, the speed at which we deliver results, the affection and respect we show
our customers, or your dedication to the work that’s expected by your employer, by their
teammates.
We can always improve and for this we need to be humble.
To be open to criticism.
Another way to invest well is in knowledge.
If I have money in my pocket today, it doesn’t necessarily mean it’ll still be there tomorrow.
Good knowledge helps me to earn more consistently.
Mainly knowledge of finance, entrepreneurship, professional qualification, communication.
This will all help me through life.
Invest in knowledge.
Note that this usually bears fruit slowly but consistently.
They say that what comes easy, goes easy.
In fact, what comes effortlessly or without knowledge goes easy because knowledge is going
to help keep the fruits around.
I don’t recommend investing in areas you don’t know much about.
But even no knowledge is a starting point: if I save at least 10% of my earnings, how
will I invest them?
Acquiring knowledge.
This knowledge doesn’t need to be merely theoretical, quite the opposite actually:
the more practical, the better.
Therefore, an important form of wealth growth is volunteering.
This means approaching profitable areas and offering to help for free, in exchange for
the experience.
Experience is worth more than money.
This will greatly advance your experience and profit potential.
One of the golden rules from The Richest man in Babylon is to invest money under the guidance
of people who know what they’re doing.
My personal comment is that it’s no use for a man to be wise, he must be reliable.
In different places around the world, there are people left, right and centre who push
pyramid schemes on you, full of false promises.
Even respected banks have financial products filled with administration fees and other
items that suck money out of your account instead of providing you with a net profit.
Let's review the three principles: Spend less than you earn
Make good choices Invest to reap the best results
This was a very quick video, but here’s the link to download the e-book that I promised
at the start.
Click on https://arata.se/bablylon to not only access the e-book – and here’s the
secret I promised you: there’s also a bonus class!
This bonus lesson isn’t available on YouTube and it’s exclusive to those who download
the e-book.
Hope you like it!
I'm Seiiti Arata from Arata Academy, and this was our video summarising and commenting on
the classic book The Richest Man in Babylon.
Subscribe to our YouTube channel to receive more news and click the link to download the
e-book.
Cheers!
- Now that’s out of the way, let’s end the
video with some extra tips.
Loans.
As you practice the recommendations in The Richest Man in Babylon, naturally your financial
wealth will grow.
As you become richer, friends might start asking you to loan them money.
The first thing to consider is that it’s important to know what the loan will be used
for.
If the person needs the money to pay bills, this can be dangerous.
In normal situations, they should have a source of income that’ll cover this type of expense.
If the bills are costing more than they’re earning, then the chances are that they’re
spending more than they can afford to – this isn’t very financially responsible of them.
It might be that the person has suffered some unexpected loss, such as some kind of theft,
a health accident, a loss because of flood.
Again, it’s expected that they’d have some sort of financial reserve to deal with
these emergencies.
If you have saved throughout your life to have that money, why haven’t they?
At this point, it’s important that you value what you have.
If you’ve followed the rule of saving at least 10% of everything you receive each month,
it’s an effort, a personal sacrifice.
What you’ve accumulated over the years could be lost in a matter of minutes in a hasty
decision to loan money to someone when you know there’s a chance you won’t get it
back.
So, a piece of advice from The Richest Man in Babylon is to firstly ask what the person
would want to do with the loan.
Sometimes people might say that they want to take part in some kind of business endeavour
that they know little or nothing about - this is doomed to fail, and so the chances that
they’re going to pay you back are very small.
In cases where they plan to use the money for something smart, you should only agree
to the loan after some sort of guarantee has been made.
Preferably, the person should be able to provide you with some collateral that has a market
value that’s higher than the value of the loan.
It could be a cheque, a written agreement, or even a jewel that’s been valued by an
independent jeweller.
This has absolutely nothing to do with doubting the character or integrity of the person.
This is a common misconception: no bank would lend money based on someone’s character.
Loans are financial transactions and the risk must be measured.
There’s less risk when there’s a good warranty, and the risk is high when there’s
no guarantee.
It’s that simple.
People who refuse to offer collateral are most likely to be unable to repay the loan
under the terms promised.
Just as the loan shouldn’t be granted based on the subjective analysis of the character
or integrity of the person, don’t let appearances deceive you.
A lot of people who drive new cars, dress well and go to expensive places do so without
having money: everything is funded by cheque and credit card, as well as loans with other
people like you.
Evaluating the loan application by appearances is a lousy deal.
It’s better to be safe than sorry.
People often feel compelled to lend money to a family member or friend.
However, it’s the unpaid loan that can end the relationship once and for all.
Never decide straight away without having a good conversation.
Usually loan applications happen in a social situation, some just skirt in, which is why
it can be difficult to say no sometimes.
But you also don’t have to say yes.
Explain that such issues need to be viewed with care and planning.
Know that the person who’s willing to make the request should also be willing to have
to explain their intentions better and receive a no if the request is inconsistent from a
financial point of view.