Here are the main ideas from George S. Clason’s The Richest Man in Babylon, explained using a simplified, foundational approach.
Main Idea 1: Pay Yourself First (The First Cure: “Start Thy Purse to Fattening”)
Imagine for a moment that your entire financial life is like filling a basket with eggs. Every day, you’re given ten eggs, which represent all the money you earn. Now, throughout the day, people come to you asking for eggs. The person who provides your shelter needs some eggs. The person who sells you food needs some. The person who makes your clothes needs a few more. By the end of the day, you’ve given away all ten eggs, and your basket is empty, ready for the next day’s earnings. You work hard, you earn your eggs, but your own basket never stays full. This is how most people live their financial lives. They earn money (their paycheck) and immediately begin paying everyone else: the landlord, the car company, the grocery store, the utility companies. After all the bills are paid and expenses are met, they look at what’s left—often nothing—and think, “This is what I have to save.”
The Richest Man in Babylon argues that this entire approach is fundamentally backward and is the primary reason most people struggle to build wealth. The book’s single most important principle, the foundation upon which all other financial wisdom rests, is to Pay Yourself First.
What does this mean? It means before you pay the landlord, before you buy groceries, before you pay for anything else, you take a portion of your earnings and you put it aside for yourself. The book recommends a specific, manageable amount: “For every ten coins thou placest within thy purse take out for use but nine.” In modern terms, this means saving at least 10% of every dollar you earn.
This isn’t just a suggestion to save; it’s a radical shift in perspective. You must treat this 10% not as leftover money, but as the single most important bill you have to pay. You are your own greatest creditor. The payment to your future self, to your wealth-building fund, comes off the top, before any other obligation. By doing this, you are no longer saving what is left after spending; you are spending what is left after saving.
Let’s break down why this is so powerful. First, it guarantees that you are always building your personal wealth. It automates the process of accumulation. Just like the egg merchant in the book who puts ten eggs in his basket each morning but only removes nine, he knows with mathematical certainty that his basket will eventually overflow. There’s no guesswork. By consistently taking 10% out of your income stream for yourself, your “purse” begins to fatten immediately. The book describes the psychological benefit of this: the feeling of a growing purse, the satisfaction and confidence that comes from owning a treasure that is yours alone.
Second, it forces discipline in your spending. When you only have 90% of your income left to cover all of your expenses, you are forced to prioritize. This directly leads to the second great law, which is controlling your expenditures. You learn to live within your means because the means have been deliberately defined. You adjust your lifestyle to fit the 90%, not the 100%. You might find that you didn’t really need that expensive daily coffee or that extra subscription service after all.
The story of Arkad, the richest man, illustrates this perfectly. His journey from a poor scribe to a man of immense wealth began the moment he embraced this one simple truth, taught to him by the money lender Algamish: “I found the road to wealth when I decided that a part of all I earned was mine to keep.” This wasn’t a complex formula; it was a simple decision to value his own future more than his immediate, fleeting desires. When he started keeping one-tenth of his earnings, he was surprised to find that he got by just as well as before. He wasn’t significantly worse off financially in his day-to-day life, but he was building a foundation of capital for the very first time. This capital is the seed from which the tree of wealth grows. Without this first step of paying yourself, you have no seed to plant, and no tree will ever grow. It is the essential starting point for anyone who wishes to move from merely earning a living to building true, lasting wealth.
Main Idea 2: Live Below Your Means (The Second Cure: “Control Thy Expenditures”)
Once you have committed to paying yourself first, a new challenge immediately arises. If you’ve set aside 10% of your income for your future, how do you manage to live on the remaining 90%? This leads directly to the second core principle of the book: you must learn to control your expenditures and live on less than you earn.
The book makes a profoundly simple yet often overlooked observation about human nature: “That what each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary.” This is a critical insight. Think of it like a gas filling a container; your spending will naturally expand to consume all of your available income. If you get a raise, it doesn’t take long for new “needs” to appear—a nicer car, a bigger apartment, more expensive hobbies—that absorb that extra money. This is why many people who earn significantly more than they did five years ago still find themselves living paycheck to paycheck, with an empty purse at the end of the month.
To counter this natural tendency, you must actively differentiate between your true needs and your desires. The book emphasizes that all people, even the wealthiest, have more desires than they can ever satisfy. Arkad, the richest man, admits that there are limits to his time, his strength, and what he can enjoy. The key is not to try and satisfy every whim, but to thoughtfully select which desires are worth fulfilling with the 90% of your income that remains after you have paid yourself.
The practical tool for achieving this is a budget. In the book, one of the students rebels against this idea, declaring, “I am a free man… I do rebel against the slavery of a budget which determines just how much I may spend and for what.” This is a common sentiment; many people see a budget as a restrictive cage that takes the joy out of life.
However, Arkad reframes the purpose of a budget entirely. He explains that a budget is not a tool of restriction, but a tool of liberation. Its purpose is not to prevent you from having things, but to ensure you can have the things that matter most to you. Arkad compares it to a bright light in a dark cave; a budget illuminates the “leaks from thy purse.” It shows you exactly where your money is going, allowing you to plug the leaks of unconscious, frivolous spending and redirect that money toward your most cherished desires.
Imagine your income is a flow of water into a barrel. If the barrel has small, unseen holes in it, you’ll never be able to fill it, no matter how much water flows in. The daily coffees, the unused gym memberships, the impulse purchases—these are the small holes. A budget is the process of inspecting your barrel, finding those holes, and plugging them. Once the leaks are plugged, the barrel starts to fill up, giving you the resources to do what you truly want, whether that’s taking a great vacation, buying a home, or simply having a financial cushion for peace of mind.
This principle is about conscious living. It’s about making deliberate choices with your money. The book advises you to engrave upon a clay tablet—or, in modern terms, write down in a notebook or app—all the things you wish to spend money on. Then, you separate them. You select the absolute necessities that must be covered within your 90% budget, and then you select the most important desires that can also be fulfilled within that budget. The rest—the multitude of other casual wishes—must be crossed out and let go without regret.
This isn’t about a life of miserable deprivation. It’s about trade-offs. It’s about deciding that financial security and achieving your major goals are more important than the temporary satisfaction of a minor, impulsive desire. By mastering this habit, you defend the 10% you’ve saved (your “fattening purse”) and ensure that the foundation you’re building isn’t eroded by undisciplined spending. It is the crucial defensive strategy that protects the offensive strategy of paying yourself first.
Main Idea 3: Make Your Money Work for You (The Third Cure: “Make Thy Gold Multiply”)
Saving 10% of your income and living on the rest is the essential starting point for building wealth, but it is only the beginning. A purse full of gold that sits idle is gratifying to a miser, the book says, but it earns nothing. It’s a static, lifeless hoard. The third, and perhaps most exciting, principle is to put your accumulated money to work, so that it begins to generate more money on its own.
The book uses a beautiful and powerful metaphor to explain this concept: “Every gold piece you save is a slave to work for you. Every copper it earns is its child that also can earn for you.” This is the ancient Babylonian way of describing the miracle of investing and compound interest. Your saved money is not just money; it is capital. It is an army of “golden slaves.” Your job is to send this army out to labor for you.
When you invest your money—whether in a loan to a shield maker as Arkad did, or in modern instruments like stocks, bonds, or real estate—the returns you get are the “children” of your original capital. For example, if you invest $1,000 and it earns a 10% return, you get back $100. That $100 is a “child.” Now, if you spend that $100, as Arkad did in one of his early mistakes on “honey and fine wine and a scarlet tunic,” you are “eating the children of your savings.” You’ve stopped the growth process.
The real magic happens when you reinvest those earnings. In our example, you would add the $100 back to your original $1,000. Now you have $1,100 working for you. The next year, a 10% return is not $100, but $110. Your original “slaves” are still working, and now their “children” are working alongside them, producing “grandchildren.” This process, where your earnings themselves start to earn money, is compounding. It’s a snowball effect that, over time, can turn a small, humble purse into a vast fortune.
The book illustrates this with the story of a farmer who gives a money lender ten pieces of silver to invest for his newborn son. The money lender agrees to pay a rental (interest) of one-fourth of its value every four years and adds that rental back to the principal. By the time the son is 20, the ten pieces have grown to over thirty. When he is 50, they have multiplied to 167 pieces. This demonstrates the incredible power of time and compounding. The initial sum was small, but because it was put to work and its earnings were consistently reinvested, it grew exponentially.
The ultimate goal of this principle is to build what the book calls a “golden stream that continually floweth into thy purse and keepeth it always bulging.” This is the concept of passive income. You want to build an army of golden slaves so large and so productive that their earnings alone are enough to support your lifestyle. This is the point at which you have achieved true financial freedom. Your income is no longer solely dependent on your own labor—”whether thou work or travel,” the income continues to flow.
This idea transforms the act of saving from a passive, defensive measure into an active, offensive strategy. You are no longer just storing money; you are building a business. Your capital is your workforce, and your role is that of the wise owner who finds profitable employment for it. It requires a shift in mindset from being a laborer who trades time for money, to an investor who uses money to make more money. This is the engine of wealth creation, and it is powered by the fuel you created with the first two principles. Without this step, your wealth will never be more than the sum of what you have managed to save from your own hard work. With it, your wealth has the potential for limitless growth.