Arkad was a very rich man in ancient Babylon, he was the richest man in the land. When he met with two of his childhood best friends, they asked him how he had become so wealthy while they had to work very hard and yet could barely feed their families.
Arkad smiled and told them that in exchange for his services as a scribe he had once been told the secret to wealth by another rich man.
The secret was: “A part of all you earn is yours to keep.”
Meaning, you must not spend all you earn. You must invest it, and invest it wisely.
Here’s what Akrad did to get started, he saved up enough to lend to a shield maker, who then paid interest on the loan. This helped Arkad grew his wealth.
The Richest Man In Babylon free book summary will include parables like this one. This summary will give you advice on how to grow your wealth that you can use in today’s modern day setting.
You’ll also discover why good luck is just a matter of working hard.
The secret to building wealth is to save and invest wisely.
Becoming wealthy is not just about hoarding money, but you must also know how to use it properly. First thing you need to do is save up money, then know where and how to invest it.
Obviously, this means you can’t spend everything you earn, you must, therefore, live slightly below your means. Cut back on those little luxuries in life. Instead of having dinner in a fancy restaurant every weekend, why not make it once a month? What about the branded shirt you buy every month? Regular stuff will get the job done just as well.
You can save up money in this way but is not going to be sufficient for you to become wealthy. You must also seek investment opportunities.
Money under your mattress won’t increase in value. Putting it into a bank will generate interest but will not make you wealthy.
Instead, you have to invest your savings in something that will generate more wealth, like stocks, government bonds, or funding start-ups. If you do this right, your savings will increase in value with no extra effort on your part.
Whenever you do make an investment though, be smart about it. Do some research about the investment first and only entrust your savings to people who know how to manage them.
For example, you shouldn’t give a lumberjack your money because he says he’s going to set up a business buying and selling diamonds. On the other hand, giving your money to a hedge fund to invest wisely can make sense; they probably know the market better than you.
The secret to being financially successful is to always admit how little you know.
True wisdom lies in realizing how very little you actually know and admitting it. The ancient philosopher Socrates considered himself wise for admitting: “I know that I know nothing.”
When you learn new things, don’t fool yourself into thinking that you now suddenly know a lot. It is a fact of life that the acquisition of new knowledge simultaneously illuminates further areas of ignorance if we choose to observe them.
For example, once you learn about the fundamental basics of the theory of relativity, you cannot help but encounter its more complicated and sophisticated areas, which make you realize that there’s a lot more you don’t yet understand. If anything, you now feel more ignorant than before!
Some people learned the basics of investing and thought they knew enough to attain wealth through them but failed spectacularly in 2008 because they had not paused to learn more about their investment. They forgot to ask questions and research about the sustainability and riskiness of the investment.
If you do go that extra step and study finance, you can take of advantage of the ignorance of others who didn’t bother. This might, for example, help you spot investment opportunities before others or make lucrative trades with them.
You can only accumulate wealth slowly by learning through a process of trial and error.
Many people dream of becoming rich overnight. Unfortunately, for you to be wealthy, it takes time. It is made up of countless tiny steps forward and you will encounter problems and setbacks for sure.
Because the world is constantly changing, especially financially.
This means that you cannot just stick to one wealth-building strategy. An example is investing in the stock market. You don’t just sit back and watch the money come in. The financial system is very uncertain, so sooner or later something massive will happen, like the stock market collapsing. You have to adapt to the new situation and look for new strategies, experimenting with them and probably failing in a few. And just as you find your next winning strategy, something huge will happen again.
Through this process of experience and adaptation, you will increase your overall ability to invest wisely as you accumulate more knowledge. Take note that this process, of trial and error, involves making mistakes. This means you need to ensure these mistakes are small, so don’t invest money you can’t afford to lose in an area in which you’re not certain.
Don’t just work for money to afford the things you want today, make long-term investments where your money works for you.
What do you think is the difference between making money and attaining wealth?
“Making money” describes a process where you work for money. This is also called active income.
“Attaining wealth” means being in circumstances where money works for you. Others call it passive income.
Imagine you work as the manager of a profitable factory, and every month you take home a very good wage. Yes, you are making money, but you are not attaining wealth.
But when you invest some of that money you earn from your active income, you would be attaining wealth. For example, if you were to save part of your income, invest it in real estate, and have it rented out, your money would be working for you and not the other way around.
Making money is usually done to achieve short-term financial success: you usually only care about the things you can buy with that next paycheck, while the future is of little concern. But there is an inherent danger in this kind of thinking: what if the next paycheck never arrives?
Attaining wealth, on the other hand, involves longer-term goals.
For example, the real estate that you bought won’t bring you immediate wealth; rather, you have to first pay off the investment or wait for its value to increase. This may take a while but once the investment starts paying off, it will most likely keep doing so for as long as you own it.
Making investments that get paid back with interest can be highly lucrative.
When you borrow money – for example, by taking a student loan – chances are you have to pay interest on it.
Conversely, when you loan someone money, you can expect them to pay interest for it, and this is one of the key ways in which those with money can attain more wealth.
As an investor, interest is an attractive way of building wealth because of its compound nature: you can get your interest earnings to increase over time because you will also be earning interest on top of interest.
Imagine you invest $100,000 in a new business and on the due date, the owner duly pays you back the original sum plus ten percent interest, amounting to $110,000. You then decide to reinvest the whole amount into another business with the same terms. This time when you get back the sum plus ten percent interest, you’ll receive $121,000 – your interest earnings have increased.
You can continue this process indefinitely, always earning more and more interest. As you can see, your money not only works tirelessly for you, it also becomes increasingly effective at what it does over time.
Opportunity is a source of good luck which – unlike chance – may be pushed to occur more frequently.
How would you define luck?
Say you’re playing in a tennis tournament. You’ve practiced hard for months and prepared thoroughly. In the end, you win the final by clipping the top of the net so the ball bounces just out of the reach of your opponent.
Was this pure, coincidental luck? Of course not, you had earned that luck through your hard practice.
When people talk about random luck, they’re really talking about chance. Chance implies something random happening, like winning the lottery or being struck by lightning.
Actual luck needs to be distinguished from chance because luck is not truly random. Instead, people work hard for it and earn it. So how can you work to make yourself “luckier”?
Simply by being constantly on the look out for opportunities to increase your wealth.
For example, imagine an entrepreneur who is interested in consumer technology, and therefore spends time every day reading trend reports, examining the global financial situation and reaching out to innovators in her network. One day she reads that 3D televisions are expected to be the latest trend, and later that same day hears from an inventor in her network who has discovered a method for producing 3D televisions at half the price.
Naturally, she seizes the opportunity and starts producing the televisions, becoming very successful. Clearly, her hard work, vigilance and willingness to seize the opportunity were what produced this “stroke of luck.”
Work hard to spot opportunities and seize them without procrastination.
So why do people forego opportunities?
Far too often it is because they procrastinate.
You can’t wait for opportunities to be handed to you on a silver platter; you must be proactive and seize them or you’ll miss out. If you want to increase the flow of opportunities that you see, you simply have to work hard. Study and investigate the areas you’re interested in and build a network, so you’ll be better able to spot and appreciate opportunities when they do come around.
Remember though that golden opportunities really are rare, even if you work hard. This means you might have to wait a while and this can be discouraging because it seems your hard work isn’t producing any results.
But your endurance will pay off eventually when an opportunity does become apparent.
Make rational choices about your expenses and don’t take on debt.
Have you ever wondered how some people wind up in financial ruin? Usually, it’s simply because they make irrational financial decisions.
You need to make all decisions about expenses and costs using a realistic assessment of your personal needs and your financial circumstances. Say you desperately want a new flashy car. You don’t really need it and buying it would require taking out a big loan.
Clearly, you should not get it, but let’s say you do anyway. Now you’re using most of your income to pay off the interest, and eventually, you hit the point when you should pay back the actual debt. You can’t afford it, so you take another loan just to pay off this one.
Just like that you’ve ended up in a debt spiral, and had better hope that the flash car is also comfortable to sleep in.
In fact, taking on debt, in general, is a bad idea, because you won’t be able to save up money to invest and accumulate wealth. Instead, you’ll be spending your income on paying back the debt.
The secret to becoming wealthy is living below your means to save up money, and investing part of it in a way that generates interest for you. You must also understand that you can earn yourself luck by working hard and seizing opportunities bravely. Live below your means and invest part of what you earn – wisely.
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