Hello, Hive Book Clubbers and all Hivers!
The New Year is coming and most (if not all) of us want our lives to be a lot better in all aspects, our finances among others, right? Well, that's true at least for me.
"We don't wish to go on year after year living a slavish life... working... working, getting nowhere..." - Benzir (The Richest Man in Babylon)
There was an audiobook version of the classic book by George Clason, “The Richest Man in Babylon” which I have listened to many times over, not just 10 times but more. The reason I love listening to it, again and again, is the financial wisdom it contained, the ideas are so practical that they are applicable today although it has been written many years ago (1926). And because I love to share, I decided to write some of the most important key points that I have digested from it. Even applying all of it so as to improve our personal finances.
In one of the stories in the book, there was a man named Arkad, who worked hard as a scribe with the thought of earning money and keeping some but his financial condition didn't change despite his years of labor. He was very keen to learn how to acquire wealth and not just work all his life. The opportunity came one day when Algamish, a rich merchant came for a tablet (a piece of stone where documents are carved) that needed to be completed urgently. Arkad was not able to finish it and the rich man was mad. Arkad challenged him to share how he became wealthy and in return, he will finish the tablet in 2 days. The rich man took the deal.
Arkad made good of his promise and finished the tablet within their agreed time, hence the rich merchant also fulfilled his end of the bargain and shared his wisdom on how he built his wealth.
Arkad, a smart man he was, applied the rich man's advice, learned from his own mistakes along the way, and consistently did what he was advised to do until he eventually became the richest man in Babylon that even the king sought for his wisdom to educate his fellow Babylonians on how to accumulate wealth.
Disclaimer: Not Financial Advice. The ideas expressed in this article are my own interpretation of what I have heard from the audiobook. Thank you :)
"Wealth like a tree grows from a tiny seed. The first copper you save is the seed from which your tree grows. The sooner you plant that seed, the sooner shall the tree grows. The more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade." - Algamish, the rich merchant
It simply means paying yourself first. Saving up as early as you can, keeping at least 10% of your income first, and it must not be spent on anything nor touched no matter what happens. It is suggested that it should be done consistently and one can increase the amount when able. 10% and not less, regardless of the income amount.
Personally, doing this was quite challenging at first. Not being used to set aside for savings, the farmboy and I usually forgot and spend our monies outright. But as we forced ourselves into it, we eventually learned and it is now the very first thing we do when there is money coming in.
It definitely feels good knowing that we have a stash of money somewhere and it is growing every time we add up to it. The very purpose of this is to save enough to invest at a later time.
The author mentioned that a budget shows the holes in one's purse. And it is very true because when we start to budget our monies, we learn to leave out those that are not really necessary.
Back in the day, we never budgeted. We just spend on the things we want only to discover that we actually don't need because we bought them on impulse. Later, it had become stressful to keep or organize them in our little home so we gave most of them away. We learned from our past experiences and nowadays, we only buy what we really needed.
In today's fast-paced economy, there are many get-rich-quick schemes so we have to be careful in investing our hard-earned savings. I learned that the Chinese way to increase their wealth is compounding. They re-invest their profits instead of spending them. They keep doing that until their wealth grows enough to create passive income to sustain their lifestyle.
In the crypto-verse, there is DYOR (Do Your Own Research) which we must do before investing in a coin; and TP (Take Profits) where we must know when to take our profits from our investments. We don't just invest blindly because we don't want our monies going to waste. I have had bad investment decisions in the past and I learned from them. Now, I don't just jump into things because someone says so. Although sometimes, I still fall into the trap, lol!
Having experienced renting for some years, we learned the hard way that rents paid secretly hurt our finances. So for me, it is better to own a home even if it takes some years to get it paid. Some financial advisers say otherwise but the benefits of owning one are quite enormous - the convenience of being able to do what you want within your property; the confidence you gain from being able to achieve one goal means you can achieve another; the money saved or used in other things instead of using it to pay for rentals and many other pros.
Here in our country, the value of real estate keeps rising each year. So I believe it is a good investment in the long run. Or even today, most houses in the city are rented out, hence, creating income for the owners.
This is where most people struggle. It is sad to see families fall apart financially when their breadwinner dies or is no longer able to work. The book recommends long-term investments such as buying properties/real estate or lands for the sole purpose of having a secured financial income when one retires.
In recent times, financial advisers also recommend buying life insurance or other forms of insurances that mature at a certain period of time.
Our recent experience when my mom-in-law passed away taught us another valuable lesson. Our tradition makes it very costly when one in the family passes away. The expenses during the wake are usually above 500K in our own currency which is quite heavy even for a middle-class family. It was just good that we have insurance in place.
It is often said that the best investment one can make is for himself and it is a fact. One who stops learning stops growing too. The advent of the internet and crypto makes it easier for one to earn nowadays but we have to keep learning along the way.
This is the very reason why some people who never set foot in any school achieve great things and accomplishments because they are open to learning from others, and they know whom they learn from. We can never be too learned, so we must keep our minds curious and seek more knowledge to improve our skills and ourselves as a whole.
Bad debts can be really dangerous. I personally people who have lost their properties because of loans they took that didn't work well to their advantage.
My personal experiences also taught me some of the best financial lessons I have had these recent years. Having credit cards makes it easy to splurge on things and I did so some years back. I was stressed out when I learned that I went overboard so I canceled one after paying my dues.
Taking loans is okay as long as the loans are used to create opportunities to earn more. It becomes bad when we incur them just to buy for things that in the end, we don't actually need or even benefit from.
The above are just some of the many valuable lessons from the book. There are even detailed plans on how to pay off debts and how to rise up from getting buried into one. It is a great classic and I highly recommend it to anyone who is challenged to build his own wealth traditionally.
