The Richest Man in Babylon

One of the most interesting – and useful – books that I have read was a small paperback less than 150 pages long entitled ‘The Richest Man in Babylon’.

Written in 1926 by an American called George Samuel Clason from Missouri, the book was described by its author in his foreword as ‘a book of cures for lean purses’. Using easy to understand language and writing his story in the form of a parable set in ancient Babylon, Clason provided a simple yet profound guide to financial understanding – commencing with the inspiring observation that ‘Lo, Money is plentiful – for those who understand the simple rules of its acquisition.’

The story begins with Bansir, a chariot maker in ancient Babylon, meeting his old friend Kobi the musician – and their discussion getting down to how they both worked so diligently and so hard at their jobs and yet remained poor. The two of them decided to do something about it and so set off to meet their old friend and classmate Arkad, who had become one of the richest men in Babylon, and ask his advice about how they too could become rich and comfortable.

Now Arkad treated his old classmates kindly when they came to him, and (to cut Clason’s long story short) gladly shared with them the wisdom he had acquired. Among the most important principles he taught them was what I like to term the “Ten percent commission”.

In simple terms, Clason’s story of the ten percent commission went something like this:

Many of us as a result of our work earn a decent wage, which is paid into our hands at the end of each month. From this salary that we earn we pay for rent, for food, for clothes and other things – and most of us, I am sure, plan to put what is left at the end of the month into some form of saving. Often, however, what happens is that the end of the next month comes round and we find that we have spent all the previous month’s salary and have nothing left! There is no money remaining to save, and we are impatiently waiting for the next pay day to come so we would have money to spend again (and perhaps repay what we had borrowed to tide us over until payday!).

Arkad’s simple admonition to his friends was, “Pay yourself a ten percent commission on all that you earn.”

In simple terms, Arkad’s advice was that his friends should, as soon as they received their monthly salary, set aside ten percent of it as a saving. Most of us can quite easily live on 90% of what we earn – and if the ten percent is taken out of the salary at the beginning, we don’t really feel it being lost, because we can without much difficulty adjust to surviving on the 90% left.

It does not really matter what you do with the 10% commission that you pay yourself – whether you put it into a Katay or PiggyBank-type till, or put it into a savings account. What matters is that if you do this continuously each month without a break, you will end up with an extra month’s salary at the end of ten months!

Once you have got into the habit of paying yourself a commission (which, unlike a politician who makes 10% on a government contract, you richly deserve), you will also adapt to living on 90% of what you are paid. After ten months you will have a whole month’s salary to invest. Invested wisely, this will be the money which will start to earn you money – and if you make it a habit to pay yourself a commission on all that you earn, in time you will have acquired several months salary without working for it!

Paying yourself a commission is such an easy thing to do – and although you may not become the richest man in Colombo, you will certainly be on the road to creating wealth for yourself.