The 100-year old personal finance book that everyone should have to read in high school

Troy Shu
7 min readFeb 14, 2020

What books did you have to read in high school? The Great Gatsby? Lord of the Flies? Jane Eyre? How about this personal finance book that was written almost 100 years ago?

I was lucky enough to have had a high school teacher that assigned this 100-year old personal finance book. This book was the most memorable book I read in high school. I still recite some of its teachings to my wife today (who rolls her eyes at me because she’s pretty good at personal finance already)!

The book was written in 1926, the Roaring Twenties if you remember them. It might actually be the oldest personal finance book still in print. Amazon sells the paperback for just $7 and even has an audiobook version for just $11. It has stood the test of time for almost 100 years. That means it’s a high quality read in my book.

Even Tony Robbins highly recommends it, after reading it himself when he was young.

So, what is the book?

It’s a book called The Richest Man in Babylon. The words “richest man” instantly hooked my high school brain. It takes place in Babylon too, the OG cradle of civilization? What was this crazy tale?

The Richest Man in Babylon is a fictional story about a poor scribe named Arkad who becomes the richest man in, you guessed it, Babylon.

Arkad, through his adventures, teaches the reader a set of personal finance principles that he uses to get rich. He calls them the “Seven Cures For a Lean Purse”. This is my modern interpretation and commentary of the “Seven Cures for a Lean Purse”, and how they apply to our lives today.

👛 The First Cure: Start thy purse to fattening

A fat purse is good. It means it has lots of coins in it.

Arkad, our poor scribe who becomes the wealthiest man alive, recommends saving 10% of your annual income to start building your purse (or wealth).

We learned before that a 10% savings rate will let you reach financial independence in 51 years. Not bad, but with some creativity and luck you can save a lot more than that. For example, a 50% savings rate will allow you to retire in 17 years!

Arkad had one saying that should be a required motto for children to recite every morning, just like the pledge of allegiance in American schools. And this saying is a lot shorter, at only three words.

What is it?

“Pay yourself first.”

Which is a little different from just “save money”.

When you receive some amount of money, you should pay yourself first. Give your future self some portion of that money, and save it. Let it grow. Your future self needs it, especially when it’s too old to work and just wants to enjoy its remaining years of life.

Only after you pay yourself should you pay other people (or corporations because corporations are people now). If you don’t have enough left over to pay everyone else, figure out how you can change your lifestyle to pay everyone else less, or how to earn more. You-your future self, your family-are the most important, so you pay yourself first when you receive money. Don’t spend all your money away right when you get it.

🙅 🛍 The Second Cure: Control thy expenditures

With this principle, Arkad talks about how luxury spending can be confused as necessary spending. When we make more money than we spend, we might first think “spend it” instead of first thinking “save it” (“pay yourself first!”).

This also touches upon a real phenomenon that my wife and I constantly fight ourselves. It’s called lifestyle creep.

Lifestyle creep is when your income increases and you start thinking of luxury spending as necessary spending. Like Netflix. Or Amazon Prime. It’s ok to reward yourself for a job well done (earning more money is not easy!), but it’s also important to remember not to waste your new-found gold on short-sighted purchases. Amazing that Arkad recognized the idea of lifestyle creep way back in the Babylonian days!

💵 📈 The Third Cure: Make thy gold multiply

This one’s easy. Invest your gold in ways that earn you more gold. Make your money work for you, in your sleep.

There are many ways to do so. Invest in the stock market, or implement an asset allocation strategy that could make your money grow faster. Invest in real estate. Put your emergency savings into a high yield savings account (I like Betterment’s High Yield Savings account, with the highest savings rate I’ve found).

🔒 The Fourth Cure: Guard thy treasures from loss

Arkad’s advice here is to “Study carefully, before parting with thy treasure, each assurance that it may be safely reclaimed. Be not misled by thine own romantic desires to make wealth rapidly”.

Don’t get blinded by the desire to get rich faster. Study the risks of any opportunity carefully, and be skeptical. Higher returns come with higher risk, so understand those risks well.

🏡 The Fifth Cure: Make of thy dwelling a profitable investment

Arkad recommends owning your own home instead of renting your primary residence.

Your house can act as an investment if it increases in price over time.

He also mentions two other benefits of owning your own home: it creates a sense of fulfillment and confidence, and it reduces the cost of living.

To own his own domicile and to have it a place he is proud to care for, putteth confidence in his heart and greater effort behind all his endeavors. Therefore, do I recommend that every man own the roof that sheltereth him and his.

Thus come many blessings to the man who owneth his own house. And greatly will it reduce his cost of living, making available more of his earnings for pleasures and the gratification of his desires. This, then, is the fifth cure for a lean purse: Own thy own home.

I’ve never owned a home (yet), but I can see how owning your home creates a sense of pride, because you can truly make it your own. Of course, it also means spending time and money to fix things when they’re broken, but even that can feel meaningful as well (“look, I’m fixing my own toilet!”), if you approach it with the right mindset.

Arkad’s claim that owning a home “[puts]… greater effort behind [your] endeavors” is intriguing. We all want something that can help us work harder in whatever we do! He does seem to suggest that the additional sense of pride and confidence from owning a home can push us to work harder and with more energy. Or maybe it’s the lack of all the familiar noises of a traditional rental unit-loud footsteps from the neighbor above who likes home workouts or the neighbor’s TV blaring through the wall-that gives one the peace of mind to do their best work. Noise pollution is real people!

Anyways, for those of you who own a home and live in it, how true is Arkad’s claim that owning a home “[puts]… greater effort behind [your] endeavors”?

🔭 The Sixth Cure: Insure a future income

Here, Arkad recommends finding ways to make sure you have the future income to support yourself and your family with when you’re old and can’t (or choose not to) work anymore.

Pensions used to be a great way to do this. A pension is a type of retirement plan that provides monthly income to you after you reach a specific retirement age, for the rest of your life. And your employer contributes money to the pension while you’re working. How much they contribute depends on your years of service with the company (the longer you stay, the more your monthly retirement payments), your age, and your compensation.

Pensions don’t really exist anymore. Only a small number of companies still have them, like Coca-Cola and Johson & Johnson.

Did you know that 401(k)s were invented in the 70s by a group of high-earning employees who basically wanted tax breaks on salary invested in the stock market, and so lobbied Congress to allow it?

Now, 401(k)s have essentially replaced pensions as the retirement plan employers prefer. With 401(k)s, you have a bit more flexibility because you can choose your own investments and take it with you from employer to employer.

But you also bear more risk with 401(k)s. You’re choosing your own investments, which can drop in value if you don’t choose the right ones. You’re also contributing your own earnings to your 401(k), as opposed to your employer making all the contributions.

Still, if all your employer offers is a 401(k), it’s a good idea to save and invest through that because you let your money grow while also getting a tax break.

🤑 The Seventh Cure: Increase thy ability to earn

Here Arkad basically says “the more you learn, the more you earn”.

There are a lot of creative ways to make more money by developing your skills. Depending on your situation, increasing your income may be the best way to reach financial independence earlier.

Never stop learning and growing, and you will be rewarded for it.

The impact of 100-year old personal finance lessons

Reading The Richest Man In Babylon in high school was probably one of the things that most influenced my financial habits of saving and investing (thanks Mr. Hatch!). It started a passion for reading and learning more about personal finance, which led to this blog! Learning good financial habits from a young age is one of those life skills that we all wish we learned sooner, but that modern-day schools do not teach.

Do you know someone in high school? Buy them the book. Share this blog post with them for a more modern interpretation. Or start a conversation about good financial habits. And set them up for a lifetime of wealth building.

Did you enjoy reading this post? Like this post wherever you found it, or share it with others!

Originally published at on February 14, 2020.