The Richest Man in Babylon by George S. Clason is a classic book on the accumulation of wealth. It is not a get rich quick book but rather one that teaches how to build wealth over time. The principles derived from this book have stood the test of time and can be applied and utilized by any generation regardless of current economic standing. The principles are:

1.      Set Aside a Portion of Income. It stands to reason that it is impossible to accumulate savings and wealth by spending more than current earnings allow. Accumulating savings should be the highest priority in the budget. The book recommends that a minimum of 10% of income should be set aside.

2.      Live on the Rest. As an individual’s income grows, expenses always seem to grow with them. Unless these expenses are controlled and maintained within the portion of income left over from savings, monetary wealth will never be realized. Do not increase lifestyle with each and every rise in income. Use a spending plan for monthly expenses.

3.      Build Passive Income. The accumulated savings should be invested to begin earning interest and dividend income. By doing this, one can tap the power of compound interest which Albert Einstein reputedly described as “the most powerful force in the universe.” One can also use time to create passive income streams which will multiply earning potential over time.

4.      Own a Home. This may not seem wise advice given the recent market in real estate. However, it does make sense to figure out the relative cost of renting a home versus purchasing given one’s expected circumstances. As the cost of real estate declines from the recent bubble, affordability is increasing and making home ownership with the potential for equity a more logical choice.

5.      Increase Earnings. This can be accomplished in many different ways. Obtaining a more advanced degree, starting a business part-time or gaining technical skills can all be ways of increasing one’s earnings. These increased earnings can be used to pay off debt or be added to savings to build wealth even faster.

 There are several other useful principles in this short book that can be used to accumulate and safeguard wealth. One would be wise to follow the advice of The Richest Man in Babylon.