Lessons from a classic

Yesterday I went back to a charity secondhand store where we recently found some cheap party costumes. While I was there last time, I happened across a travel guide I thought a friend could use on an upcoming holiday. I went back to buy it for her yesterday, but while I was there I perused the rest of the book shelves. I managed to pick up a classic Australian child-rearing text (Toddler Taming) which I knew I could use (toilet training is tough!), but I also came across another classic – a personal finance one.

The book? The Richest Man in Babylon by George S. Clason. I picked it up for $5, though someone had relatively recently paid $21.99 for it. I was intrigued to find that, about four pages in, the previous owner had flipped over the top of the page, as if to mark it to come back to later. It didn’t look (by the condition of the book) that this had ever occurred.

While I’m not sure if the previous owner got the chance to peruse this book properly, I read it in a couple of hours this morning. I found it was everything I’d heard about from others and more. Every little story really set out the realities of wealth creation, and I found it amazing to really consider how the same excuses we use today would have been the same as those used centuries ago. While they might have lusted after fine robes, we long for Guess handbags. They longed for a fine herd, we long for a fat mutual fund!

From the author notes, I found out that Clason’s stories were used in bank pamphlets for many years, and I can see why. Nobody EVER set out lessons as clearly as this for me when I was younger. Back then I NEVER really thought to put money aside for anything more specific than a house deposit. I never thought about building wealth or investing to create cash flow. That was before I embarked on my own efforts to beat debt, and obviously I’m more than familiar with those goals now. But this book is one that can be used at any age or financial stage. I’ll keep it forever, just to remind me every now and then that having a financial purpose beyond `getting through the week’ is the only way to move forward, whether it’s shekels or dollars you seek!

The book has also made me rethink the way I budget. Generally, I have always budgeted the outgoings first, then looked at how I can meet these goals using the amount coming in. This generally works in terms of helping me meet a goal. it can be good if that goal is helpful to my bottom line (ie to build a house deposit) but not entirely if my goal is just to afford a trip, because it means I tend to focus all my spare dollars on attaining that, instead of allotting some towards `getting ahead’. So if I had $1000 coming in, I usually just paid the regular expenses, kept an appropriate amount for food and petrol, and put the rest on debt, or saving for something fun, or miscellaneous spending.

While I have heard the words `pay yourself first’ too many times to count, I suddenly realised I wasn’t living by them, especially in the weeks since I stopped working (still too busy with uni to go back).

I realised I haven’t been taking my incoming amount and dividing it, starting with ten per cent for myself. I’ve been working my budget the other way, deciding how my income can cover my budgeted amounts. Hence, the first thing that stopped when I stopped working was our saving!

This needs to get turned on its head – as of this coming week, I will put 10 per cent of our incoming funds in our emergency fund, then work out how the rest of the budget can adapt. We can definitely spend less on food and petrol, and on our miscellaneous category.

Basically, I shouldn’t be treating our variable expenses as fixed ones – this is stopping me from fulfilling one of the basics of wealth creation and consequently, we are not making any progress!

Ah, goodness! Here was I, many moons ago, thinking that getting out of debt was the only hard part. It seems there is always more to learn, and more behaviours to adapt!

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5 Comments »

  1. Roger said

    2 things:
    1. Have you ever thought about giving a google adsense account. I know I’ve received some traffic from your site and you’d be surprised at how much you’d be able to get by just doing nothing but what you’re currently doing.

    2. Budgeting I have a budget program/ spreadsheet I’ve been using for years that I’d be happy to turn over to you. http://www.kcpcrepair.com/dr/content/personal-budget-budgeting-tool

  2. louise said

    it’s a great little book, like you I wish I’d stuck to the first rule of paying myself first!

  3. Dolly Iris said

    Hmm this sounds like a good book you’ve stumbled across. There is nothing better than getting a personal finance book second hand! It’s just so right, isn’t it?!

    Your post was great. It really hit home for me because I too need to start paying myself first. Thanks for the reminder!

  4. Sharon said

    Hi there-a really great post-your ‘pay yourself first ‘comment, although I’ve heard it before, really inspired me to reassess my budget yesterday and put it into progress-thanks so much! I’ve also started a new blog, if you have time maybe you can check it out, thanks!

  5. debtfretter said

    Hi Roger – thanks for the advice _ I will look into Adsense but had thought you couldn’t use it on WordPress. And sorry too that I didn’t get back to you about guest posting on your site – I would have loved to (and still would) but have been way busy in `real life’. Maybe I can take you up on it later? Congrats to on the `big gift’ from your wife’s boss!
    Louise – I agree – I’d heard a lot about the book but never read it. Yet that’s no excuse! I’d heard the principle too many times to count. Oh well!
    Dolly – thanks as usual for commenting – you keep me motivated!
    Sharon – I checked in on your blog – it’s really good! I’ll keep reading!

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