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 growing debt burden of retiring Australians

More Australians are retiring with larger mortgages and less super. This paper explores how unlocking housing wealth can help ease the nation’s growing retirement cashflow crunch.

Warren Buffett's final lesson

I’ve long seen Buffett as a flawed genius: a great investor though a man with shortcomings. With his final letter to Berkshire shareholders, I reflect on how my views of Buffett have changed and the legacy he leaves.

LICs vs ETFs – which perform best?

With investor sentiment shifting and ETFs surging ahead, we pit Australia’s biggest LICs against their ETF rivals to see which delivers better returns over the short and long term. The results are revealing.

13 ways to save money on your tax - legally

Thoughtful tax planning is a cornerstone of successful investing. This highlights 13 legal ways that you can reduce tax, preserve capital, and enhance long-term wealth across super, property, and shares.

The housing market is heading into choppy waters

With rates on hold and housing demand strong, lenders are pushing boundaries. As risky products return, borrowers should be cautious and not let clever marketing cloud their judgment.

Why it’s time to ditch the retirement journey

Retirement isn’t a clean financial arc. Income shocks, health costs and family pressures hit at random, exposing the limits of age-based planning and the myth of a predictable “retirement journey".

Latest Updates

Interviews

AFIC on the speculative ASX boom, opportunities, and LIC discounts

In an interview with Firstlinks, CEO Mark Freeman discusses how speculative ASX stocks have crushed blue chips this year, companies he likes now, and why he’s confident AFIC’s NTA discount will close.

Investment strategies

Solving the Australian equities conundrum

The ASX's performance this year has again highlighted a persistent riddle facing investors – how to approach an index reliant on a few sectors and handful of stocks. Here are some ideas on how to build a durable portfolio.

Retirement

Regulators warn super funds to lift retirement focus

Despite three years under the retirement income covenant, regulators warn a growing gap between leading and lagging super funds, driven by poor member insights and patchy outcomes measurement.

Shares

Australian equities: a tale of two markets

The ASX seems a market split in two: between the haves and have nots; or those with growth and momentum and those without. In this environment, opportunity favours those willing to look beyond the obvious.

Investment strategies

Dotcom on steroids Part II

OpenAI’s business model isn't sustainable in the long run. If markets catch on, the company could face higher borrowing costs, or worse, and that would have major spillover effects.

Investment strategies

AI’s debt binge draws European telco parallels

‘Hyperscalers’ including Google, Meta and Microsoft are fuelling an unprecedented surge in equity and debt issuance to bankroll massive AI-driven capital expenditure. History shows this isn't without risk.

Investment strategies

Leveraged single stock ETFs don't work as advertised

Leveraged ETFs seek to deliver some multiple of an underlying index or reference asset’s return over a day. Yet, they aren’t even delivering the target return on an average day as they’re meant to do.

Sponsors

Alliances

© 2025 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.