Richest Man in Babylon – Book Summary of New York Best Seller
Man and his struggle to generate and preserve wealth are nearly as old time itself.
George S Clason wrote this book in 1926. This book dispenses financial advice through set of rules which was practiced from 4000 Years ago from Babylon. This book has been referred as timeless classic for Personal Finance.
Spend less than you earn and save the difference
Sounds simple really. Yet, this principle is not widely followed. For most people, it is a struggle to get to the end of the month and pay all their accounts and obligations. They consider themselves to be successful if they are able to achieve the same. This is at best, one step below the success ladder to wealth creation. True wealth building only starts when a person makes a commitment to pay himself/herself first each month, before anyone else. It can be as much or as little as thought wise, just so long as the amount saved is one-tenth of total income or more. A vast majority of people live paycheque to paycheque, accustomed to spending everything they have available
Seek advice from those who are competent to give it through their own experiences
Once capital starts to build up, it necessitates the need to be invested. On its own, wealth cannot be expected to grow. There are a vast variety of investment opportunities that are available for the allocation of capital growth, each comes with its own risk and return profiles. In such a scenario, the role of the advisor becomes integral.
It is very important that when you are looking to invest your hard-earned money, you seek advice from the most experienced and competent people. If you invest foolishly, your money is as good as gone.
Use Saved Money to make More Money
This is probably one of the golden truths of wealth creation. When you work hard to earn money it becomes imperative that you put that money to work for you. Most people are using the money that they earn to buy things that rust, rot, or deteriorate to a net worth of zero. These include houses, cars, boats, clothing, watches, jewellery, or any merchandise. You’re making someone else rich by doing that. Instead, look at what the smart people are doing. They are taking every dollar they save and spending that on something that will make them more money.
Don’t wish for a lump sum of cash. Work to achieve a consistent cash flow instead.
Most people, at some point in time or the other, have wished to get lucky and win the lottery. The allure of a sudden gush of cash can be very appealing. However, one must understand that any lump sum of cash that you win will eventually go to zero, possibly leaving you worse off than you were before you won the lottery. In fact, many lottery winners go through their whole winnings within a year. And their happiness levels eventually go back down to zero. Windfall gains are few and far between and are certainly not sustainable. Rather than go through this upheaval, you should want to work towards having a consistent and growing system that constantly makes you more money. It’s not how much you have, it’s how much you keep and how much you keep making in the future that counts.
Invest in your ability to earn more
As an individual, you should spend your time (or money) to improve your skills, knowledge, and ability to earn more money. Most people quit learning at the age of 21 when they finish school. While there are others who are committed to life-long learning. They are on a constant journey of knowledge assimilation. This gives them a huge advantage over peers who stop learning early in their life. While the average worker goes home after work to watch TV, does nothing to improve himself, and does not challenge himself/herself, you can get ahead by regularly adding to your own knowledge pool.
You will lose money if you let greed cloud your judgement
There is a difference between having big dreams versus letting your greed influence your decisions. You should never succumb to people who promise to multiply your investments like magic. Do not let your greed cloud your judgement. It is important to evaluate an investment basis its merits rather than basis its potential to generate superior returns. It is always better to build wealth slowly rather than rushing into an opportunity with high risk of capital loss.
People who take action get luckier because they make their own luck, Of course, do not interpret this to mean that you should gamble. Instead, take your knowledge and experience and use it. These principles are timeless classic and still golden rules for money management.
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