After reading Rich Dad Poor Dad, I decided to read The Richest Man in Babylon. Although the initial readings have some redundancies, I believe this book has its golden lesson. Here the focus is consistency in the act of saving, the discipline of understanding that a part of all you earn is yours to keep and must be invested to generate more wealth.

If I were to summarize it: if you want to accumulate wealth, be able to save at least one-tenth of everything you earn.

The Constant Flow

The most common mistake of those who start earning money is believing that wealth comes down to the amount sitting in their bank account.

“A man’s wealth is not in the purse he carries. A fat purse quickly empties if there is no golden stream to refill it.”

The modern financial system was designed to extract your money. You pay rent, groceries, taxes, the internet. At the end of the month, you have paid everyone but yourself. As the book incisively questions: if you work only to pay others, aren’t you doing exactly what a slave does in exchange for food and clothing?

The mental shift requires daily repetition: “A part of all I earn is mine to keep.”

The 70 / 20 / 10 System (Engineering to Get Out of Debt)

For those with a strangled cash flow, the book proposes a mathematical strategy that is perfectly applicable today. It is about readjusting your standard of living to the following model:

• 0.7 (70%): This is the ceiling of your living expenses. Learn to live on less than you earn.
• 0.2 (20%): Exclusively dedicated to paying off debts and clearing your name.
• 0.1 (10%): Paying yourself. This tenth is non-negotiable and must always be saved, at the very least.

The 5 Laws of Gold

Once you have learned to live on less and started retaining your capital, you need to know how to allocate it. Money obeys strict rules of preservation and multiplication:

1. The Law of Accumulation: Gold comes gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future.
2. The Law of Multiplication: Gold labors diligently and contentedly for the wise man who finds for it profitable employment. It must multiply.
3. The Law of Caution: Gold seeks the protection of the cautious owner who invests it according to the advice of experienced men.
4. The Law of Risk: Gold slips away from the man who invests it in businesses or purposes with which he is not familiar.
5. The Law of Greed: Gold escapes the man who forces it to impossible earnings, who listens to tricksters, or who trusts in romantic desires when investing it.

The Soul of a Free Man

Wealth does not survive weakness of character. How can you call yourself a free man if your own indiscipline led you to ruin? Where there is determination, the way can be found.

This involves everything from not being too proud to do honest manual or technical labor, to knowing how to shield your capital. If you desire to help a friend, do so, but in such a way that his burdens are not placed upon your shoulders. Our wise acts bring us pleasure; our unwise acts torment us.

Work well done, whether building an allocation spreadsheet, studying, or in your primary profession, brings satisfaction and makes a man better. The more knowledge we acquire, the more we may earn.

Link to buy the book: https://amzn.to/4gfxdox

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Next reading: How to Organize Your Financial Life