Notes: The Richest Man in Babylon

-

 Lessons:

A PART OF ALL YOU EARN IS YOURS TO KEEP

One must save at least 1/10th of whatever he/she makes in order to become wealthy. One must understand that you must keep a part of what you make in order to become wealthy.


SEVEN CURES FOR A LEAN PURSE

1. In order to start fattening your purse, you must start saving - the book suggests saving at least 1/10th of what you make

2. Control Your Expenditures - you must pay yourself first the 1/10th and live off of the rest of the 9/10ths of what you make. The book suggest that you won't even notice saving the 1/10th but if you don't even save the 1/10th then you will likely spend the whole thing. Most people will be able to figure out how to live on 9/10ths of their income with proper budgeting and sticking to that budget. You must always live within your means.

3. Make your savings multiply - After saving, you must invest your savings in order to have your money multiply. The book suggests lending it out at a certain rate so that you make your money work for you. Each coin counts.

4. Guard your money from loss - the book suggests that Capital Preservation is key. You can't afford to lose any money and you must be careful with your money - don't trust anyone with investment decisions that has no experience or knowledge with the said investments, and investing in assets that are safe and collect a fair return. Don't be tempted by high returns as that's where the risk of losing capital is likely the greatest. Take investment advice only from the wise and experienced.

5. Make your house a profitable investment - The book suggests that you should own your house and make it a good place to live. Have a garden and keep it well. The book suggests that you should own your house rather than rent it, as a part of your rental cost would be put towards equity in the house if you were to finance a house via a mortgage. Own your house rather than renting.

6. Ensure a future income - because you won't live forever and can't work forever. You must ensure that you have a future income when you're old and that your family will be taken care of in case of your death. Keep investing wisely so that your investments will provide you income when you are no longer able to work. This includes buying life insurance to financially protect your family from your eventual death.

7. Increase your ability to earn - invest in yourself and your skills so that you provide more value to others and in turn others will pay you for your skills, talents, and knowledge. Along with this, you must also have definite and precise goals - having too many goals or goals that are too broad and undefined defat the purpose and are ineffective. Furthermore, the book suggests one must do the following in order to 'respect' yourself or be a respectable person:

  • Pay your debts promptly - live within your means and don't go buy anything that you aren't able to pay for;
  • You must take care of your family so that they will speak well of you;
  • You must make a will in case you die and make sure your estate and property are divided up accordingly;
  • You must have compassion for those who are less fortunate or injured, stay humble, and doo deeds of thoughtfulness within your means for those that you hold close to you;
  • You must cultivate your own powers to study and become wiser and more skillful and talented so that you can achieve your goals or what you desire.
Five Laws of Gold:

  1. Money comes to those who can save at least 1/10th of their earnings
  2. Money multiplies for those who find profitable investments for the money
  3. Money is protected for those who only take investment advice from the wise and experienced in handling investments
  4. Money slips away from those who invest in things they aren't familiar with or not approved by the wise and experienced in handling investments
  5. Money also slips away for those who are too greedy and force investment in things that would be seemingly too good to be true - i.e. foolish investments

Other Notes:
  • Fortune favors those who act, make moves, those who procrastinate will ultimately get what the sow
  • What comes to those easily, is also lost easily. Wealth stays for those who earn it gradually and value the patience and discipline it takes to generate and keep wealth.
  • Only lend to those who are 1) have the ability to repay their debts and 2) have the tendency and character to repay their debts. You must do the proceeding with very careful analysis. In order to be safe, you must also take some sort of collateral - if possible, take collateral at a value more than the loan amount - this ensures the likelihood that the borrower won't skirt payments and will repay the loan. Better be safe than sorry later. Better have a little caution than later regret.
  • Like the walls of Babylon, you can't afford to be without proper protection (insurance) bad and unforeseen things do happen and you must protect your finances with them with some sort of buffer (or insurance).
  • Where there's a will, there's away - never say never - never think a challenge is too great to achieve what you want to achieve - even if you don't get exactly what you want, you can at least get close - keep trying, learning, and persevering
  • If you have debts - pay them off gradually - have a plan - use 2/10ths of what you earn to gradually pay off what you owe - in time, the obligations will be paid in full.
  • Take joy and passion in the work you do and do your best job - you are your own brand and your work speaks to your name - good work is noticed and is attractive to those with a keen eye for such.


Comments

Post a Comment

Popular posts from this blog

"Entrepreneurs take Calculated Risks". A Redux.

-
"Entrepreneurs take calculated risks" is a phrase or quote I hear ever so often in sales, entrepreneurship, or business seminars... but the phrase always confused me. At first, I just took it for what it was worth, never really thinking too much about it. But after some pondering, I feel like this word of advice never really gave me any thing concrete to work off of. I mean, what are am I really supposed to get from it? Can any entrepreneurs even explain this to me? Are entrepreneurs out there calculating the risks on Excel Spreadsheets and Monte Carlo models or are they really just using their intuition? (which could be even better than the mathematical models). I feel like it's the latter... so why even use the phrase? First of all, it holds little meaning, and secondly it's confusing. i would say that a majority (now, I said majority , not all) of entrepreneurs out there aren't even doing any real mathematical simulations out there. Let me tell you why this 
Read more

Buffett - Only need to swing at great pitches

-
 I finally understand what Buffett meant when he said you don’t have to swing at every pitch. As individual investors (or non-institutional investors), we don’t have the pressure to perform year-after-year. No one is holding us accountable to return 10% a year - this gives us flexibility to buy or not buy - or i.e. to stay in cash for prolonged periods of time (and perhaps stay in money market). This provides individual investors the option to only swing at the truly great pitches (wait till a stock is convincingly undervalued). Of course, you can go short - but you then fall into the trap of trying to time the market. And as Buffett has also said, the market can stay irrational longer than you can stay solvent. If the market keeps running up because of irrationality - or some other reason - you lose if you are short. So why even take the chance? Why not just stay in cash and be safe, and if the market does tank, that's when you strike/swing the hardest.
Read more