Financial Book Review: The Richest Man in Babylon — Timeless Wealth Principles Through the Lens of the Infinite Banking Concept
Financial Book Review Series – The Richest Man in Babylon
One of the main teaching points we consistently bring up is that Infinite Banking is not an Or strategy, it is an and strategy. What we mean by that is that implementing the process of becoming your own banker and the Infinite Banking concept into your financial lives won’t compete with what you are currently doing. It will compliment it, and most likely enhance it.
If you haven’t read the book The Richest Man in Babylon by George S. Clason I highly recommend it. It was first published in 1926 and the core principles outlined in the book are just as relevant today as they were almost 100 years ago. What that should tell you is that the path to building great wealth has always been known. The only thing holding the majority of people back is their own discipline and short attention span.
In this article I am going to go over the key messages and core principles outlined in this book from the lens of an IBC practitioner.
A quick summary:
The Richest Man in Babylon is a collection of parables set in ancient Babylon, designed to teach timeless financial principles. The story centers around Arkad, once a poor scribe who becomes the wealthiest man in Babylon by following sound financial habits and principles.
At its heart, the book is about taking personal responsibility for your financial life, building habits that create stability, and understanding that wealth is the result of discipline, intention, and control rather than luck or high income.
Key Messages
Building wealth is possible for anyone who follows sound principles over time, regardless of their starting point.
Wealth comes from a combination of disciplined saving, controlling expenditures, wise investing, and continual self-education.
Temporary setbacks, including loss and debt, can be overcome with planning and determination.
Core Principles
Pay yourself first: save at least 10% of your income before spending on other needs.
I’ve discussed this point before about your savings being in direct conflict with your expenses. However, the point from the book is still very valid. If you don’t have the discipline or the habits to set aside money, it is going to be extremely hard to build wealth.
Having a budget and identifying which money is for paying bills, debts, discretionary expenses and savings is important. We want to take it one step further. Once you have identified these things, we now need to synchronize them.
IBC turns this core principle into the fuel that drives your financial engine by focusing on where you store this 10% rather than what you do with it. If you store it in a place that gives you control, you can leverage against its value to pay for your other expenses while your “savings” continue to compound and grow, uninterrupted and tax advantage, in the background. For the rest of your life.
Control your expenses. Live below your means: Spend less than you earn, distinguishing needs from wants.
This is basically the core principle of every single financial lesson ever made. It’s hard to build a bigger financial future when you have nothing left at the end of the month. This is essentially a warning to understand Parkinson’s Law.
How IBC helps with this is when you control your cash flow, you become intimately aware of how you are spending it. Then, IBC gives you the framework to build wealth by disguising investing in your future as saving. Any money you put towards premium benefits you both now and in the future.
It also makes large purchases very deliberate. When you are acting as the banker in your own financial life, you will have to scrutinize major purchases. That is part of the responsibility of performing that function.
Make thy gold multiply. Make your money work: Invest your savings so they generate further earnings, and only invest in things you understand.
There are only two sources of income: people at work, and money at work. This hasn’t changed in the last 100 years. Obviously, we want to ensure our money works even harder than ourselves at making us more money. IBC again does this.
With contractual guarantees you know for certain you will have more money later than you do now. The best part is, there is nothing further that you have to understand. The cash value must equal the death benefit at the life insured’s age of 100. If you increase the death benefit, then the cash value must also increase because the contract hasn’t changed.
On top of this, if you want to invest in other areas, you significantly lower the risk if the money you are investing is from a policy loan. If your investment is bad and you lose all the money, you can rest easy knowing the original sum of money you paid in premium is continuing to work in the background making you more and more money. Yes, there will be an outstanding policy loan, but when you are ready to invest using policy loans, you will already be in a situation where you have enough control over your cash flow that some of your recaptured budget items are going to pay for that loan. This is the beauty of control.
Guard thy treasure from loss: Avoid risky investments and seek advice from knowledgeable people before making financial decisions.
There is not a place more secure to store your money than in a whole life insurance policy. The policy is guaranteed to pay out. There is no risk because the outcome of financial gains are written into the contract as guarantees. Again, the cash value must equal the death benefit. It can be no other way.
All investments carry risk, that is why there is the potential for gains. Some investments have reduced risk, but this comes with reduced rate of return. A participating whole life policy is not an investment. There is no risk. You can see before you buy the product the projected growth within the policy. Although those illustrations are reliant on dividends, the policy would grow without the dividends if they were ever not declared. However, Equitable life has had participating whole life policies since 1936 and they have never once not declared a dividend.
Own your home (Reinterpreted for Today).
While there is plenty of debate about this specific principle in today’s society, I look at home ownership a different way. I believe the value of something is in the eye of the beholder. I’ll give you an example. We bought our home in 2021 and my wife thinks we overpaid.
To the outside observer, that may be true, although the market in 2021 in London was bananas and that was just the cost of moving here.
However, our next-door neighbour is my wife’s childhood best friend who has kids the same ages that we do. This increases the value of the house for our family.
Everyone needs a place to rest their head at night. Whether you own your home or rent is a personal choice. There are good arguments on both sides of the coin. Like many assets, if you buy and hold a property for a long time, the price will generally appreciate over time. There are of course maintenance and bills associated with home ownership, but again, you have to live somewhere.
IBC doesn’t directly impact this principle unless you implement a family banking system. Then, if your kids for example want to buy a home, and you have the capital inside your policy, the mortgage can come from the family bank. Now your kids get to own their home, and the family bank gets to profit off of the loan. It’s a zero risk win win.
Ensure a Future Income (Prepare for Old Age).
The actual quote from the book is “provide in advance for the needs of thy growing age.” Retirement planning is becoming contentious with the rate at which inflation is eating away at what people thought were sufficient funds. This is the biggest drawback of retirement planning based off of withdrawals.
The second biggest drawback is that you don’t get to benefit from the use of that money during the buildup phase. This is what leads people into the scenario where they save 10% of their after-tax income, but spend 20% of their after-tax income on interest alone. One step forward, two steps back.
IBC flips that script. Not only do you get a rock-solid passive income asset that experiences its greatest growth in the last years of a person’s life, all but ensuring you never run out of money, you can also leverage against that money to access policy loans during the buildup. Then, instead of that 20% interest being a financial drain, it’s a financial gain. There truly is no better financial tool for retirement planning. Did I mention you can annuitize these policies to receive lifetime income completely tax free?
Increase your ability to earn.
You are your greatest asset. If you are reading this post, you already understand this because you are looking into different options to better your financial life. Your earning potential increases with skill, knowledge and intention. If you know what the problem is, you’ll know what to do.
For most people however, they never truly understand just how much money they spend in interest over the course of their lives. Multiply that by all of your family members and you see just how much you have lost.
No more. IBC consolidates finances into an easy, guaranteed method to build wealth. Pay premiums and see guaranteed growth. Then you have all the time and money you want to go forth and continue to increase your knowledgebase.
Final thoughts.
Wealth is a mindset and a discipline, not an income level. In the book, every Babylonian who achieved wealth did so by changing behaviour, not income.
Guidance matters. You are here reading this so you might as well join the community and learn with us. In the book, the main character Akrad insists on mentorship from people with real results. We live what we teach. We have our own policies and are consistently looking for ways to expand our system. We are just as eager to improve as you are, so come along and learn with us.
Lastly, personal responsibility is non-negotiable. Everyone character starts in financial struggle, but the book insists that circumstances don’t change until behaviour does. IBC is all about becoming your own banker. No one else should have control over that function. If they do, they profit off of it. We teach people to be self sufficient so they can become the leaders of their own financial futures. It’s amazing what you will be able to do with the right coaching, guidance, mentorship and motivation. I can’t wait to succeed together.
