The 7 cures for a lean purse
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The Richest Man in Babylon is one of my favorite books of all time. It’s so good, I read it twice in one weekend.
Babylon was one of the wealthiest cities of ancient times, because of the financial principles of its people. They recorded stories and fables with these lessons on clay tablets which were unearthed not too long ago. Those tablets are the foundation for the several stories that make up The Richest Man in Babylon.
One of my favorite principles from the book is the one we’ll be discussing today: seven cures for a lean purse.
The 7 cures for a lean purse
1) Start thy purse to fattening
No matter how little or how much you earn, pay yourself 10% first.
It’s yours to keep.
2) Control thy expenditures
Don’t confuse necessary expenses with desires.
Control yourself, and only buy what you need to buy if you’re in a tight financial position.
Obviously, if you have more of a cushion with your income, it’s not as big a deal. You can still buy those desires, as long as you are contributing 10% to yourself. The more you can save—e.g., if you can increase that number from 10 to 20%—the faster you’ll increase your wealth.
I see everybody struggling with this—not just farmers. Few people have that Warren Buffett mentality of living off the bare necessities. Buffett is content with a cheeseburger and fries instead of caviar and expensive wine, and he takes the great majority of the money he makes and reinvests it somewhere else.
3) Make thy gold multiply
Take your 10% (minimum) and build a golden stream of income to “keep thy purse bulging.”
This means investing in income-producing investments, whether that’s real estate, stocks that pay dividends, or farmland. If you took 10% of your income every year and invested in farmland, you could probably buy a quarter land every two or three years, depending on your size.
4) Guard thy treasure from loss
Invest only where principal is safe and where a fair rental can be collected.
Make sure you’re getting investing advice from experts, too. You never want to go after risky things. If your co-worker has a crazy investment idea, you don’t want to join them because you’re going to lose your principal. So make sure it’s a safe bet.
Take farmland or residential real estate, for example. Generally, if you’re not buying at the peak of the housing market, real estate is a safe investment.
Same goes for solid stocks: Apple, Microsoft, etc. If you’re investing in these and they’re paying you dividends, chances are your principal will stay safe.
5) Make thy dwelling a profitable investment
Many blessings come to one who owns his own house.
I’m not sure if I totally agree with this one; whether you should own a home has a lot to do with your personality. There are merits to this principle, though.
The way the book’s stories talk about this is that your wife will be a lot happier if she has a garden to tend to. So will you, and you can only control a garden if you own your own dwelling.
Obviously, in Babylon they weren’t taking out 30-year adjustable rate mortgages. Things are little different these days.
But in the book you bought a house over the course of five or ten years, and you lived in it until you could afford to buy a better, bigger house. If you’re buying a house and paying it off in five years, you won’t have any housing expenses other than taxes.
In the end, though, I guess it’s one of those things that’s more psychologically beneficial than anything else.
6) Ensure a future income
Make sure your assets are sufficient to take care of your family when you are no longer able to earn, or if you pass away unexpectedly.
If we live long, we will all get to the age where we can’t hustle like we used to. Where we can’t work 18-20 hour days.
Make sure you’ve got money set aside so that when you come of age or something happens to you, you have enough money to take care of your family.
7) Increase thy ability to earn
Educate yourself; increase your skillset.
The more complicated the challenge you’re solving, the better the payoff. For example, if you’re just cutting somebody’s grass, that’s not a big challenge. The value of doing that is a lot less than solving some financial challenge for a huge company.
Increase your knowledge, read books, and your earning will go up.
This series will teach you the timeless ways of the financial elite of ancient Babylon—and they still work very well today.
I’ll leave you with one of my favorite quotations from the book:
“A fat purse quickly empties if there be no golden stream to refill it.”
This post was based on an episode of the Cash Cow Farmer Podcast. To hear more content like this in audio form, subscribe to the show here.