At a conference last summer I was talking with a friend about books that we had read that had had a significant impact on the way that we look at business and finance.
One of the books that he highly recommended that I hadn’t read yet was a book called The Richest Man In Babylon. It was written in the 1920s by a man named George Clason, and to be honest, there’s no way that I would’ve picked it up to read on my own without that recommendation.
But I’m so glad that it was recommended to me! It’s now one of the books that’s going on the financial/business must-read list for my kids during high school (along with Total Money Makeover by Dave Ramsey, How To Win Friends And Influence People by Dale Carnegie, the Uncle Eric books by Richard J. Maybury, and several others).
The Richest Man In Babylon is a collection of parables set in ancient Babylon, each with a different financial lesson. The parables are simple, and yet so incredibly profound.
I wish that I had read this book in High School, and re-read it every year during High School, college, and throughout the 14 years that Ryan and I have been married.
It’s that good.
There’s a wealth of financial truth in this book, but the point of the very first parable is the one that resonated with me the most.
“I found the road to wealth,” he said, “When I decided that a part of all I earned was mine to keep. And so will you.”
In other words, don’t forget about paying yourself.
With the money that we make through our work each month we pay the retail stores for clothes, we pay our bank for our mortgage, we pay the grocery stores to buy food… but what about paying OURSELVES for our work?
I’m not paying myself when I buy groceries. I’m not paying myself when I buy clothes. I’m not paying myself when I pay my mortgage or rent every month. Those are all payments to other people.
I pay myself by what I save and invest.
Instead of looking at saving as “saving”, look at it as paying yourself out of the money that you work so hard to make. Just that one simple change in my mindset has made the process of saving money FUN instead of just another thing that I “had to do”.
The recommendation in The Richest Man In Babylon is to start with paying yourself 10% of your income (and increasing as you are able). For every dollar that you earn, you pay yourself at least 10¢. Do you see the perspective change with that? Instead of, “you should save 10¢ out of every dollar you earn” – you PAY YOURSELF 10¢ out of every dollar you earn. I like that so much better!
In The Richest Man In Babylon, Arkad, the man who learned these lessons and is now reteaching them through the parables in the book, says that when he first started paying himself he saved a tenth of his income for a year and then invested that money with a brickmaker who went to buy jewels to trade.
Arkad’s teacher Algamish said in response, “Every fool must learn, but why trust the knowledge of a brickmaker about jewels? Would you go to the breadmaker to inquire about the stars? He who takes advice about his savings from one who is inexperienced in such matters, will pay with his savings for proving the falsity of their opinions.” (emphasis mine)
It’s not enough just to invest. You have to actually make good investments with advice from people who are experienced.
If you’re looking for an experienced investing professional that you can trust, one of the most well-respected financial experts today, Dave Ramsey, has put together a rigorous application process so that investment professionals across the country can be endorsed by his team.
To be selected as an ELP candidate, Dave’s investing professionals must:
- Have proper licensing and be in good standing with their respective regulatory agencies.
- Have experienced both challenging times as well as good times in their industries, giving them the knowledge to help their clients in any type of market.
- Plan to be in business long-term because they love what they do.
- Have the ability to super-serve all the customers who come to them through the ELP program.
In Dave Ramsey’s book The Total Money Makeover, Dave gives 7 Baby Steps for getting out of debt, saving for retirement and college, and building wealth so that you can give to others and to future generations.
His steps are:
1: Build a $1,000 Emergency Fund for unexpected life events
2: Pay off all debts (excluding the house)
3: Put 3 to 6 months of expenses in your savings account
4: Invest 15% of your income into Roth IRAs and pre-tax retirement
5: Start saving for your children’s college funding through an Education Savings Account or 529 Plan
6: Pay off your home early
7: Build wealth and give like never before!
Many people have to go through these steps later in life because they didn’t start paying themselves from the beginning. I think about how our finances would look differently right now if I would’ve paid myself 10% of my income starting when I got my first job at 16. What if Ryan and I had started off our marriage with this mindset?
But we can’t look back, we can only look forward and change how we live from now on, and try help the generations that come after us not make the same mistakes that we did.
Part of my hope for our children is that they will start life with a commitment to stay out of debt, to live on as little as they possibly can (especially before they have children), and to start paying themselves as much as possible as soon as they can so that they can start investing early with the help of someone they can trust.
Disclaimer. The materials available at this web site are for informational purposes only and not for the purpose of providing legal or accounting advice. Nothing on Surviving The Stores should be construed by you as a source of legal or accounting advice. You should not rely or act upon the contents of this site without seeking advice from your own attorney or accountant.
Disclosure: This is a sponsored post through the Dave Ramsey team and I am thrilled to be partnering with them to bring you more ways to save and get/stay out of debt! All opinions are 100% my own.
What’s the one thing you would want to go back and tell your 18 year old self about money?