Start thy purse to fattening
21 March 16
Reading time: 3 minutes
Have you ever come across The Richest Man in Babylon? It’s a timeless set of parables by George S. Clason that were first published way back in 1926. He set his stories in Babylon, which he regarded the wealthiest city of the ancient world, a place where people were good at earning money, saving it and making it work for them to earn even more.
But the interesting thing is that the stories begin with there actually being a huge problem with inequality in Babylon, with the king worrying about all the riches being held by a few. So he finds an expert to share the techniques of the rich with everyone.
Ninety years on, while I’m not sure this will cure today’s inequality, these parables are as current as ever. Consider these seven “cures for a lean purse”, with my modern equivalents in brackets. Sound familiar?
- Start thy purse to fattening. (Paying ourselves first)
- Control thy expenditures. (Budgeting expenses; spending less than we earn)
- Make thy gold multiply. (Investing and making our money work for us)
- Guard thy treasures from loss. (Protecting what’s important)
- Make of thy dwelling a profitable investment. (Optimising our mortgages)
- Insure a future income. (Shaping our retirement lifestyles)
- Increase your ability to earn. (Investing in ourselves)
So let’s just say that the idea of “paying ourselves first” has been around an incredibly long time, possibly even 6,000 years if you go by Babylon. (Or at least as far back as 1926.)
The book recommends setting aside one gold coin for every ten earned – a 10% savings rate. But how do we know how much to pay ourselves first? (If we were paying ourselves last, it would be just whatever was left over, which usually is not much.)
I’ve been guilty in the past of pulling a number out of thin air to save. It turned out to be trouble – an attempt to fly without bothering to strap on wings or find out how hard the ground is!
How much we set aside has to be an amount that works for our budget, a savings rate that fits our lifestyle. (If that amount’s not enough to get the results we’re after, that lifestyle may need a redesign, or perhaps a whole renovation.)
To help, there’s Sorted’s new budgeting tool, which has been rebuilt from the ground up. It lets us plug in an amount to budget, fill in all the categories we spend money on, and plan our saving. It’s easy to see how much we can set aside comfortably, without missing the fun in life or neglecting the bills.
That’s when the purses start fattening.