The Richest Man in Babylon
George S. Clason
The Richest Man in Babylon is George S. Clason's collection of parables set in ancient Babylon, written in the 1920s, that teach the oldest rules of personal finance: keep at least a tenth of everything you earn, control your expenditures because they grow to meet income, make your savings work for you, guard them from loss, and invest in your own ability to earn. It remains the shortest complete introduction to saving.
You have been meaning to save once things settle down, and they never settle down. Clason's Babylonians had the same problem in 1926, and the cure they offer is not patience but order: a tenth of every payment is yours, taken first, before the landlord, the shop or the tax collector gets a vote.
The book in essence
Clason wrote the stories as pamphlets for banks and insurance companies to hand to customers, and collected them into a book in 1926. The frame is a set of tales about Arkad, the richest man in Babylon, and the lessons he gives to those who ask how he did it. The seven cures for a lean purse are the core: start thy purse to fattening by keeping a tenth; control thy expenditures, because what we call necessary expenses will always grow to equal our income unless we protest; make thy gold multiply by putting the savings to work; guard thy treasures from loss by seeking advice from those experienced in the thing you invest in; make of thy dwelling a profitable investment; insure a future income; and increase thy ability to earn. The five laws of gold restate the same in the form of a warning about greed and impatience.
The book's language is deliberately archaic and its examples are camels and gold coins, which is part of why the rules have never dated: there is nothing in them tied to a product or a decade. It has been continuously in print for a century and is the book most personal finance writers cite as the one that started them.
Who it's for
- Anyone who has never managed to save and wants the simplest possible rule to begin with
- Readers who prefer a story to a spreadsheet
- Parents and teachers looking for a first money book to hand to a teenager
Who it's not for
- — Readers wanting anything about investing beyond the principle of seeking experienced advice; the book predates every modern instrument
- — Anyone put off by archaic, sermon-like prose; the ideas are simple and the style is a taste
Key lessons
01
A part of all you earn is yours to keep
For every ten coins that enter your purse, spend only nine. The tenth is not a sacrifice but a priority: you are the first creditor and you are paid before the others. Clason's insight is that the amount matters less than the order, and that a small share kept first will, over years, outweigh a large intention to save what is left.
A nurse in Ankara has tried for three years to save whatever remains on the last day of the month, averaging a few hundred lira. She sets a standing order for eight percent on the day she is paid and calls it a pay cut. By the third month she does not notice it; the account holds more than the previous three years.
02
Control your expenditures
What each of us calls necessary expenses will grow to equal our income unless we protest. A raise is absorbed within months by a slightly better flat, a slightly better phone and a habit of taxis, without anyone deciding it. The tenth taken first is the protest; the rest is learning to tell a real need from a desire that has dressed itself as one.
A software team lead in Istanbul gets a thirty percent raise and, six months later, cannot say where it went. He looks back: the new flat, the car, the restaurants. Next raise, he sends half the increase to the savings order on the day it arrives and lets his expenses discover the other half.
03
Make your gold multiply, and guard it from loss
Savings left idle are only a delay; they must be put to work so that they earn and their earnings earn. But Clason pairs this with a warning that has outlived every bubble: invest only where the principal is safe and take advice only from those experienced in the thing itself, not from a brick-maker about jewels. Guarding the savings from loss comes before growing them.
A teacher in Eskişehir spends a year following a stock group's tips and finishes down while the market is up. She moves her monthly amount to a broad, low-cost fund through her bank and mutes the group. The brick-maker, she says later, was the group.
Try this today
Set up a standing order for at least five percent of your income, dated on the day your salary arrives, to an account you do not spend from.
Quick check
What is Clason's first cure for a lean purse?
Why do expenses always seem to equal income?
Selected quotes
“A part of all you earn is yours to keep.”
“What each of us calls our necessary expenses will always grow to equal our incomes unless we protest to the contrary.”