7 Timeless Principles of Budgeting Every Frugal Person Should Know

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What are the 7 principles of budgeting everyone should know? While the book is nearly 100 years old, these timeless tips are worth learning.

timeless budgeting wisdom
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Some personal financial advice is timeless, which explains why George S. Clason’s book The Richest Man in Babylon (originally published in 1926) is still in print today.

It’s a bit hoky (it was written nearly 100 years ago), with old-fashioned language, but there are many takeaways that the modern person can apply.

The book is a collection of parable-like narratives set in ancient Babylon, renowned as the wealthiest city of the ancient world.

In the book, Arkad shares with his friends the secrets of wealth (below) and tells of how he went from having no money to his name to being the richest man in Babylon.

Despite the antiqueness nature of the narrative, the basic principles of money management are good to know.

Disclaimer: This is general information only, a summary of the book Richest Man in Babylon. It does not constitute advice. You should always consult a qualified financial expert when making money decisions to tailor plans to suit your circumstances.

The Seven Cures for a Lean Purse

1. Start Thy Purse to Fattening, aka Build Your Savings

Arkad recommends to his friend that for everything the earns, he should save at least 10% of his income.

In other words, this is the principle of paying yourself first.

In modern times, the process is simple (although if money is tight, not necessarily easy).

We can use online banking to set up an automatic transfer to a savings account each payday. That makes paying yourself first friction-free. Even if it’s only a couple of dollars, it’s a good habit to create.

“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 thy soul.”

2. Control Thy Expenditure, aka Don’t Buy Stuff You Don’t Need

The next recommendation Arkad gives his friend is to use a budget.

Controlling your expenditure boils down to one principle: spending less than you earn.

“Budget thy expenses that thou mayest have coins to pay for thy necessities, to pay for thy enjoyments and to gratify thy worthwhile desires without spending more than nine-tenths of thy earnings.”

Again, when money is tight, this can be hard. A budget can help you see where you spend your money, what your discretionary expenses are and where you can cut expenses if needed.

3. Make Thy Gold Multiply, aka Invest

Arkad then tells his friend to invest his savings:

“Then, make your treasure work for you. Make it your slave. Make its children and its children’s children work for you.”

Investing in assets (of which there are many options) is one way to build wealth.

You should seek professional financial advice to see if this is a good option for you and what’s best for your personal circumstances.

4. Guard Thy Treasures Against Loss, aka Seek Professional Advice

Money management is complex.

With shysters, cyber-hackers, scammers, complicated fine print, and people who ‘mean well,’ it can be hard.

That’s why it’s important to get sound advice from a qualified financial expert (or several) when making financial decisions.

“The first sound principle of investment is security for thy principal. The penalty of risk is probable loss. Study carefully, before parting with thy treasure, each assurance that it may be safely reclaimed. Be not misled by thine own desires to make wealth rapidly…Counsel with wise men. Seek the advice of men whose daily work is handling money.”

5. Make Thy Dwelling a Profitable Investment, aka Home Ownership

“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.”

Given the current state of affairs, with sky-high prices, not enough supply, and rising interest rates, this can be bitter advice. It makes sense – when you eventually own your own home outright, it can give you security.

6. Ensure a Future Income, aka Plan for Retirement

“…it behooves a man to make preparation for a suitable income in the days to come, when he is no longer young, and to make preparations for his family should he be no longer with them to comfort and support them.”

In Australia, superannuation and the age pension can help with retirement planning. As part of the planning, you might want to consider writing a will and what insurances are right for your circumstances.

As with the other tips Arkad gives his friend, it’s important to seek professional advice when planning for your twilight years.

7. Increase Thy Ability to Earn, aka Continual Learning

Arkad’s final piece of advice to his friend is to always be learning new things.

“Cultivate thy own powers, study and become wiser, become more skilful, and act as to respect thyself.”

Continual education and self-improvement are key to improving yourself and your employment prospects and give you the potential for a raise or a new and better job.

Like all advice, it’s not right for everyone, and it’s important to tailor it to your circumstances.

And while the principles George S. Clason shares in his book are simple, the devil, they say, is in the detail.

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