The Rich in Babylon

In my opinion, the book "The Richest Man in Babylon" by George S. Clayson is a MUST read for anybody thinking about financial freedom. According to WIKIPEDIA the book began in 1926 as a series of informational pamphlets. Banks and insurance companies began to distribute these pamphlets, and the most famous ones were eventually compiled into this book.

Listed below are 7 gems I have learned from this wonderful book:

1. 10% of what you earn is for you to keep
The first thing to do every month before you pay any of your bills is to PAY YOURSELF FIRST. The minimal rate is 10% but the higher the better. Gross or net percentage of your salary? Gross is of course better!

On a personal note:
As a Christian, I pay God 10% through tithes before I pay myself and my creditors. Irregardless of our religious beliefs, we need to acknowledge there is a Superior Being at work and He is the one that enables us to make a living. Do drop me an email if you want to discuss more on the whole area of tithing.

2. Control thy expenditures
Although 90% is for you to spend, spend it wisely. The idea here is delayed gratification and to save more than the suggested 10%. The more you save now, the more you enjoy later.
Illustration:
You starve yourself in order to set aside a budget of RM900 a month for car hp repayments. RM900 per month for the next 7 years gets you a Toyota Vios whereas RM500 per month for the next 5 years gets you a Proton Savvy. My advice, get the Savvy and invest the extra RM400 per month.

3. Multiply thy Gold by making it work for you
The most essential advise, INVEST. If you don't put your money to work it will become lazy and you may eventually lose it. Reinvest your returns and utilise the power of compounding interest.
As they say, money will make money.

4. Don't lose thy principal
This doesn't mean that you should put all your money in FD! At the prevailing interest rate of 3.8% and against a backdrop of an even higher inflation rate, that would not be an entirely wise thing to do. What it does mean is that, get valuable advise from books and experts like bankers and Certified Financial Planners before investing your savings.
Avoid Get Rich Quick Schemes like the plague!

5. Owning your own house
As far as possible, purchase your own home instead of renting it. Do your computations wisely and don't go overboard when buying and renovating a home. Nobody wants their home to end up on the auction block!

6. Insurance
Don't forget to buy insurance especially if you have dependents. How much coverage do I need?
Excellent question which I will touch on one day. Can't wait? Drop me an email.

7. Increase your ability to earn
In the words of George Clayson himself:
"Thus the seventh and last remedy for a lean purse is to cultivate thy own powers, to study and become wiser, to become more skillful, to so act as to respect thyself".