How can we achieve financial independence? (lessons from the book ‘The Richest man in Babylon’)

Financial education is one of the most overlooked aspects of general knowledge in our world at the moment. I don’t want to be judgmental about it, but our educational systems don’t focus enough on teaching us the importance of financial freedom and the impact it has on our lives. As hard-working individuals, it is our responsibility to have a clear understanding on how to spend the money we earn. One of the best ways to educate ourselves is by reading different books and putting time and effort into understanding the fundamentals of finance. If you’re looking to go down the same path and educate yourself, I have the perfect book to suggest, ‘The Richest Man In Babylon’.

This book talks about ways to save, invest and make your money grow, and can be the perfect guide for you to kick start your way into financial independence. This book will take you through a seven step process, which is beautifully termed as ‘seven cures for a lean purse‘, and I will be talking about three of those cures in this post. So let’s get started.

The first cure – Start thy purse to fattening

The author tells us that the first cure for a lean purse is to never leave it empty. As simple as it may sound, the first step to build a fortune for yourself is to have the habit of saving a small portion of what you earn every month. This is one of the most commonly advised strategies in the world of financial education, and yet so many people still struggle to keep up with the habit. According to the author, a man is supposed to save at least 1/10^th of his monthly/daily income, and has to follow this habit on a consistent basis. He states that money comes easily to the person who has a fat purse and it avoids the man who has an empty one. This, as he believes is a fundamental algorithm that is followed by the universe itself. Have you heard people say that the rich will keep getting richer and the poor will keep getting poorer ? You know why they say that ? It’s because the rich focuses more on growing the money that he has rather than spending it. He understands the importance of saving his money and cares deeply about having a fat purse. That’s the kind of mentality that we are supposed to have. There are many reasons to why we end up spending all of the money we earn. One of the reasons is that we focus on the instant gratification that we get from our daily needs and expenditures rather than focusing on things that will increase in value over the period of time. The key idea here is to save up the money we spend on unnecessary things, and use that money to buy assets that will make your money grow.

The Second Cure- Control Thy Expenditures

One of the questions that may arrive in your mind is ‘How can I save one tenth of my income if my income is not sufficient for all my expenses?’ To learn how to save money despite having a modest income, we’ve got to understand the difference between our expenses and desires. It is very important for us to figure out all the basic necessities that we have in our day to day lives and find a way to live with the help of nine tenths of our income. One of the best practices to follow is to track all of our expenditures for a month, list them down and try to understand where all our money is going, and once we’ve done that, we can understand what are the things that are absolutely necessary for our survival and try to cut the rest of the expenses out of our lives. By doing so, we’ll realize how much money we are wasting on things that can be avoidable. I know it’s definitely not easy to cut out all our desires, because all of us have our desires and dreams, but in order to build a wealthy future, we have to live a modest present. Trust me, the money that you save today will give you the confidence and security you need for tomorrow. You may not realize it now, but when life throws a can of garbage at you, you know at least your purse will be of help!

The Third Cure- Make Thy Gold Multiply

Okay, so now you’ve started saving money every month, and you’re wondering what to do with that money next. You’ve also removed all unnecessary expenses from your life, and you’re probably wondering, ‘If I’m not supposed to spend that money for myself, then what the hell am I supposed to do with it?’ Here’s the answer. A wise man will not only save some money for himself, but he will also make his money work for him. He will find different ways to make his money multiply and grow his purse larger over time. The author tells us that a man’s wealth is not in the money he carries in his purse; its the income he builds, the money stream that continually flows in to his purse and keeps it always bulging. The goal here is to create an income source that will continue to fill up your purse whether you work or not. We all know that we cannot be working hard all our life. There is a certain age in which we will have the press the stop button and relax. When that time comes around, the money that you put to work now will serve you. So how do we create that income source ? That’s where the different investment ideas start to come in. There are a ton of options for us in this day and age to invest our money, and it requires a lot of time and effort for us to figure out which suits us best. As we all know, the things that involve growing our money comes with a lot of risks most of the time, so although it is necessary for us to implement these strategies, we have to do it with a lot of precaution. It’s highly advisable that we do our research before jumping into this. Anyways, I hope you understood the importance of investing.

To summarize the topics, here are the three cures for an empty purse :

1. Start Thy Purse To Fattening –> (Save Money)
2. Control Thy Expenditures –> (Spend Wisely)
3. Make Thy Gold Multiply –> (Invest)

Hope you liked this post and found it useful. Thanks for reading !