David Moir/Reuters
The "secret" to getting rich is not much of a secret at all.
"It is practical. That which one man knows can be taught to others," George S. Clason writes in his 1926 personal finance classic "The Richest Man in Babylon."
Clason's collection of parables, based in the ancient city of Babylon, starts with the story of Arkad — the son of a humble merchant, of a large family with no hope of inheritance — who grows to become the richest man in Babylon, thanks to wisdom he sought out from a rich money lender named Algamish.
In hopes of turning his city into the wealthiest in the world, the King of Babylon asks Arkad if he can share the "secret to wealth" with the rest of the city. Arkad complies, and over the course of seven days, teaches a class of 100 men what he calls the "seven cures for a lean purse."
Strelka Institute for Media, Architecture and Design/flickr
Getting rich all begins with paying yourself first. More specifically, set aside a minimum of 10% of your earnings, Arkad advises: "For every ten coins thou placest within thy purse take out for use but nine. Thy purse will start to fatten at once and its increasing weight will feel good in thy hand and bring satisfaction to they soul."
Anyone — rich or poor — can put money aside and let it accumulate, Arkad assures his class. You just have to commit to setting aside a minimum of 10%, and you'll learn to live without it.
Today, it's even easier to learn to live without a certain chunk of your income, thanks to technology. You can automatically deposit money from your paycheck and checking account into a retirement account, savings account, or other investment vehicle, removing the temptation to spend. If you never see it, you'll learn to live without it.
"I, too, carried a lean purse and cursed it because there was naught within to satisfy my desires," the richest man in Babylon explains to his class. "But when I began to take out from my purse but nine parts of ten I put in, it began to fatten. So will thine."
Melhem Rizk/flickr
The next step is to simply spend less than you earn, which is easier said than done. Our consumer-driven society makes it incredibly easy to overspend — and what's more, when income increases, people have a tendency to boost their spending. It's called "lifestyle inflation."
"What each of us calls our 'necessary expenses' will always grow to equal our incomes unless we protest to the contrary," Arkad explains. "Confuse not the necessary expenses with thy desires."
To control your expenses, you have to become a conscious spender and recognize where your money is going. A good starting point is to record all of your purchases (whether in a notebook, through an app like Mint, or on an Excel spreadsheet) and analyze your spending patterns.
"Study thoughtfully thy accustomed habits of living," Arkad says. "Let thy motto be one hundred per cent of appreciated value demanded for each coin spent." Even if you're well on your way to accumulating a fortune, the habit of living below your means still applies. There are a surprising number of frugal billionaires who choose to save or give to charity, rather than drop their money on jets, yachts, and mansions.
loreanto/Shuttershock
Once you've made a habit out of controlling your expenses and setting aside at least 10% of your income, put that money to work.
"The gold we may retain from our earnings is but the start," says Arkad. "The earnings it will make shall build our fortunes ... Learn to make your treasure work for you. Make it your slave. Make its children and its children's children work for you."
Making your money your "slave" is the modern-day equivalent to smart investing through your employer's 401(k) plan or other retirement accounts, such as a Roth IRA or traditional IRA. Thanks to compound interest, your savings can grow tremendously over time — the trick is to set aside money regularly and to start as early as possible.
"Behold, from my humble earnings I had begotten a hoard of golden slaves, each laboring and earning more gold," explains Arkad. "As they labored for me, so their children also labored and their children's children until great was the income from their combined efforts."
