Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 72

The richest man in Babylon also lives in Australia

The Richest Man in Babylon* is one of the greatest books on accumulating wealth ever written. Its basic premise is that part of all you earn is yours to keep.

Make sure you pay yourself

Most people work hard at their jobs, yet at the end of the week they pay everybody but themselves. Heaps of dollars go to places like the bank and the supermarket, but the workers get to keep precious little.

What is the point of working for 50 years if most of what you earn ends up in somebody else's pocket? Too many people pay rent all their lives and have no money invested for retirement. When they retire they have no hope of buying a home so are dependent on rented accommodation and the pension for survival. They are never in control of their lives.

Wealth is like a huge tree that grows from a tiny seed. It takes a long time to grow but, provided it is watered and fertilised regularly, it will slowly but surely grow at a faster and faster rate.

If you go to the Gordon River area you will see magnificent Huon pine trees. Then you see little straggly ones that are no more than two metres tall and it may come as a surprise to discover these tiny specimens are already nearly 100 years old. Everything that is worthwhile – whether it be a good marriage, a huge tree, or a sound financial position – takes time to develop.

The problem with financial losers is that they can never wait for anything. They are like a child who plants seeds and then digs them up every day to see how much progress they have made. Of course the seeds never progress at all and the child soon loses interest.

Remember the miracle of compound interest and how it can sensationally increase the amount of money we can accumulate. Our savings are the ‘seed corn’ for our money tree and compound interest (plus added investments) is the fertiliser that causes the fast, lush growth. If you wish to travel down the road of financial independence you will need to start, and then maintain, a money tree.

Where does the money go?

Consider what material things the average couple has to show for a lifetime of working. If fortunate, they probably own their own home and have some superannuation. Both of these were acquired on the principle of keeping something out of each pay packet. If they had not practised that rule, unconsciously or otherwise, they would own nothing but a few clothes, a car and some household appliances.

The house was probably purchased on a small deposit and paid off over many years. Although the initial payments were mainly interest, a tiny portion went to reduce their loan. That was the foundation of their money tree. Think of the interest as rent and the small debt reduction as compulsory savings. As the years went by the loan got smaller so the interest portion of each payment reduced. Because the interest was less, the debt reduction part automatically increased. Without necessarily knowing it, they were practising one of the rules of becoming wealthy.

Their superannuation is there because employers are required by law to put money into superannuation on behalf of their staff. The amount was small at first, but grew faster and faster due to a combination of employer contributions and super fund earnings. Smart employees topped it up with their own money. That was the next limb of their money tree.

The only way we can exist if we stop work is by having our own money working for us, or by accepting government benefits. If our money tree is planted early enough, and helped to grow quickly by frequent mulching with savings, it will bear more dollars than we are likely to need when we wish to retire.

 

* This book is now in the public domain and can be sourced from many websites by googling the title.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions.

 

  •   24 July 2014
  • 1
  •      
  •   

RELATED ARTICLES

A steady road to getting rich

Why systemic risks from ‘Big Super’ may be overplayed

Rethinking how retirees view the family home

banner

Most viewed in recent weeks

The strange effect of the 30% minimum capital gains tax

The 30% minimum tax on capital gains sits at the heart of the budget's proposed reforms. Yet the mechanics reveal anomalies that introduce unexpected distortions that raise questions about its design.

High quality businesses are on sale

Beneath the dominance of the ASX's largest stocks, much of the market has been left behind. High-quality companies are now trading at levels rarely seen, offering opportunities for investors willing to look deeper.

Does your will qualify for the discretionary testamentary trust exemption?

Treasury has confirmed the exemption many families were hoping for. But buried in the fine print are two conditions that could leave some wills on the wrong side of the exemption, despite years of careful planning.

Ranking three common retirement strategies

The defining challenge of retirement isn't just about building wealth, it's about converting your lifetime savings into sustainable income. A holistic understanding of different strategies can improve long-term outcomes.

Welcome to Firstlinks Edition 667 with weekend update

The downfall of the giant and three lessons for investors.

  • 18 June 2026

Why Australian shares are falling behind the world

Australia’s market boasts a long record of outperformance, but recent results tell a different story. Is the ASX’s lagging performance a temporary setback or evidence that structural forces will keep global markets ahead?

Latest Updates

Superannuation

Are you making these SMSF mistakes?

After four decades advising investors, there are a few common mistakes I've seen SMSF investors make. From holding too much cash and chasing yield to overtrading and trusting tips. Are these errors costing you?

Retirement

Retirement spending is not one-size-fits-all

New data challenges the idea that Australians are underspending their super. The bigger issue may be helping retirees navigate complexity, make confident decisions and use their savings to support security, wellbeing and choice.

Taxation

The missing link in the CGT debate

A little-noticed consequence of Labor’s tax changes could have implications well beyond investors’ tax bills. The issue raises bigger questions about incentives, capital allocation and the drivers of long-term economic growth.

Investment strategies

The surprising beneficiaries of the AI boom

While markets obsess over AI winners, a larger, more predictable growth engine is forming. A surge in electricity demand and infrastructure build‑out reveals the quiet, durable assets evolving beneath the AI story.

Superannuation

When losses in super become irreplaceable

The notion of 'you can afford more risk' assumes that losses can be replaced. Above a $2.1 million super balance the law says otherwise, and a worked example shows the refill takes decades, or never happens.

Retirement

Why I object to ‘hitting a number’ for retirement

Many investors dream of “hitting their number” and walking into retirement. But what if reaching that milestone is the moment they should be asking the tough questions? After all, there's a lot more to life than a high portfolio value. 

Planning

Does your will qualify for the discretionary testamentary trust exemption?

Treasury has confirmed the exemption many families were hoping for. But buried in the fine print are two conditions that could leave some wills on the wrong side of the exemption, despite years of careful planning.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.