Your spending increased to absorb the difference. Where did the money go? You probably have no idea. Think about the last time you got a raise. While it may be a difficult shift at first, once you get used to it, it won’t even feel like it impacts your lifestyle. Instead of savingwhat is leftover, you are spending what is leftover. You are making a conscious decision to “pay yourself first” – to save a certain percentage of your income before you budget for your monthly expenses. The second equation is a subtle but significant mindset shift. Unless you have an unusual amount of willpower, it is difficult to spend less than you earn if you don’t specifically prioritize savings as a line item in your budget. You are following the path of the average American – almost 80% live paycheck to paycheck. If you follow the first equation, you are saving whatever is left over after you pay your expenses. However, the psychology behind them are vastly different. I will spare you the mathematical proof, but those two statements are equal. So what does it mean to pay yourself first? There are two ways to look at savings, and mathematically they are identical. This may be the most basic maxim in all of personal finance, but if you don’t follow it, you will never escape the paycheck to paycheck cycle. The first lesson given by the wealthy Arkad to his students was to pay yourself first. This, my students, was the first cure I did discover for my lean purse: ForĮach ten coins I put in, to spend but nine. Improve Your Skills to Earn More Income.Here is a summary of the main lessons from The Richest Man in Babylon: This article will cover the overarching lessons in the book. The first 7 lessons are the “cures for a lean purse” that Arkad (the richest man in Babylon) shares with Bansir, and then there are two other related parables that impart the last two bits of wisdom. 7 Lessons from The Richest Man in Babylon The book teaches that if you follows these basic lessons, work hard, and continue improving your skills, you can build future wealth through passive streams of income. It lays out the basics of personal finance – spend less than you earn, save 10% of your income, and invest wisely – in an engaging parable format (stories told to teach a lesson). The book is set in ancient Babylon, and follows the story of Arkad, the richest man in all of Babylon, imparting his wisdom to a younger man, Bansir, who wishes to become wealthy. The Richest Man in Babylon – Summary in 3 Sentences
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