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If you are looking for a simple and effective way to manage your money and build wealth, you might want to learn from Arkad, the richest man in Babylon.
“Only the poor think that there is a relationship between work and money.”
— Kabul kitchen
Arkad was a fictional character created by George S. Clason in his 1926 book — The Richest Man in Babylon, which dispenses financial advice through a collection of parables set in ancient Babylon.
One of the most important lessons that Arkad teaches is his money principle, which consists of three steps:
1. Save 10% of your income and invest it wisely.
2. Use 20% of your income to pay off your debts.
3. Live on 70% of your income and budget it carefully.
Let’s look at each step in more detail and see how you can apply it to your own financial situation.
Step 1: Save 10% of your income and invest it wisely
The first step of Arkad’s money principle is to save 10% of your income and invest it wisely. This means that you should pay yourself first before you spend money on anything else. By saving 10% of your income, you are building a reserve of money that can grow over time and provide you with financial security and freedom.
To save 10% of your income, you need to set up a separate account that is dedicated for this purpose. You can use a savings account, a money market account, or an investment account, depending on your risk tolerance and goals. You should also automate your savings by setting up a direct deposit or a transfer from your main account to your savings account every time you get paid.
To invest your savings wisely, you need to do some research and learn about different types of investments and their risks and returns. You can invest in stocks, bonds, mutual funds, real estate, or other assets that suit your preferences and objectives. You should also diversify your portfolio by spreading your money across different investments and sectors to reduce your exposure to market fluctuations.
Step 2: Use 20% of your income to pay off your debts
The second step of Arkad’s money principle is to use 20% of your income to pay off your debts. This means that you should prioritize paying off any loans, credit cards, or other liabilities that are costing you interest and fees. By paying off your debts, you are freeing up more money that can be used for saving or investing.
To pay off 20% of your income towards your debts, you need to list all your debts and their balances, interest rates, and minimum payments. You should then rank them according to the highest interest rate or the smallest balance, depending on which method you prefer.
You should then allocate 20% of your income to pay more than the minimum payment on the highest priority debt until it is paid off, while making the minimum payments on the rest. You should then move on to the next debt on the list and repeat the process until you are debt-free.
Step 3: Live on 70% of your income and budget it carefully
The third step of Arkad’s money principle is to live on 70% of your income and budget it carefully. This means that you should spend less than you earn and avoid unnecessary expenses that can derail your financial goals. By living on 70% of your income, you are creating a lifestyle that is within your means and sustainable.
To live on 70% of your income, you need to create a budget that tracks all your income and expenses. You should then categorize your expenses into fixed and variable costs, and essential and discretionary spending. You should then review your expenses and see where you can cut back or eliminate any wasteful or excessive spending. You should also set aside some money for emergencies and fun activities that can keep you motivated and happy.
By following Arkad’s money principle, you can achieve financial success and prosperity in the long run. The key is to be consistent and disciplined with your money habits and decisions. Remember that wealth is not a matter of luck or chance, but a result of planning and action.
If you have any suggestions to improve my articles, or want certain topics covered. Contact me on social platforms.
Also, your capital is at risk if you invest. Past performance and forecasts are not a reliable indicator of future performance, and this is not intended as investment advice or a personal recommendation.
Finally, you should not make any investment decisions without first conducting your own research and considering your own financial situation.
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