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Here's how to become the richest person in your city

The great wealth-building teacher, Dick Fabian, required his students to read and study three books: Psycho Cybernetics by Dr. Maxwell Maltz, about programming your subconscious mind to achieve your goals; Think and Grow Rich by Napoleon Hill, featuring the success principles of Andrew Carnegie; and The Richest Man in Babylon by George S. Clason, containing the wealth secrets of the ancients.

I thought this month, and maybe in the coming months too, it would be fun to review some of the principles in these books and see how many of them we're following. Let's start with The Richest Man In Babylon, a wealth accumulation classic that was first published in 1926 but whose ideas go back many thousands of years.

Clason got the idea to write about the success secrets of the ancients when archeologists uncovered Babylonian clay tablets thousands of years old that, rather than telling of great conquests, discussed mundane things such as how to compute compound interest, get out of debt, and increase one's gold.

We tend to think of ancient societies as primitive and unenlightened, but Babylon was the richest city in the ancient world and its people were actually quite advanced. Carbon dating shows that the Babylonian society goes as far back as 8,000 years and its demise came around 540 B.C, a surprisingly long and successful run.

From written history we know that the Babylonians were the world's first engineers, astronomers, mathematicians, and financiers. To protect their city from invading armies they built a stone wall 60 feet high (it was never breached). To bring forth an abundance of crops, they built an elaborate and massive canal system that carried water from the Euphrates River to thousands of arid acres around the city. And to please the queen and impress visitors, they built the amazing "hanging gardens," one of the Seven Wonders of the ancient world.

The Babylonians also discovered "compound interest," literally the key to wealth. They were the first to have a written language. They established the first learning center. And many of their citizens were expert in trade, merchandising, wealth accumulation and money management.

Let's sample the "5 Laws of Gold," and "7 Cures for a Lean Purse" from Clason's book, all inspired by the Babylonian wisdom inscribed on the clay tablets.

The First Law of Gold: Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.

This "savings idea" is thousands of years old and yet you couldn't find a modern idea that's more wise. Are you setting aside at least 10% of your earnings to save for your future? If not, the richest man in Babylon can tell you how to do it. Just pay yourself first. That is, pay yourself 10% of your total earnings before you pay creditors, before you pay current living expenses, and before you buy luxuries. And after you've paid yourself, make do on the remaining 90%.

But what if you have debts? The richest man in Babylon has advice for that, too. Allot another 20% to pay creditors, living on the remaining 70%. Once out of debt, stay out of debt. This is a simple but effective formula that worked well in ancient Babylon, and it will work equally well today.

But most people take a different tack: they pay their bills and buy what they want and if there is anything left over they save it. But usually there isn't, and in fact they go into debt to get all the things they want. Interestingly, the American savings rate, which has been in decline for decades, has now fallen to a negative .04 percent. Yes, Americans are spending more than they earn. Would the wise men of Babylon approve? No. But Americans have been tricked in recent years by the "wealth effect."

During the long bull market from 1982 to 2000 many folks reduced their savings because they saw their retirement accounts grow at above average rates. Thus, they felt wealthy. But when the bubble burst and the bear market started, they still didn't save. Why? Because soon enough they watched their homes rise dramatically in value as a result of historically low interest rates.

They wasted no time refinancing, pulling out easily-won equity, and spending it on everything from automobiles to swimming pools. That helped keep the U.S. economy rolling (Alan Greenspan's plan all along), but it also dramatically increased U.S. mortgage debt from $4.7 trillion in 2000 to $8.7 trillion in 2005. And through it all, Americans didn't feel a need to save because, with higher home values, they again felt wealthy.

But if the market tanks and real estate prices drop (a distinct possibility), a lot of folks could find themselves feeling poor rather than wealthy. It's a risk not worth taking. So take a tip from the ancient Babylonians and always save 10% of your earnings, and be sure to pay that 10% to yourself first, before you pay anybody else.

The Second Law of Gold: Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

The wise owner, of course, is the person who is saving 10% of his earnings so that he'll have money to invest. That way, as opportunities for profitable employment arise, he can take advantage of them.

As Clason writes in one of his parables, "...put each coin to laboring that it may reproduce its kind even as the flocks of the field and help bring to thee income, a stream of wealth that shall flow constantly into thy purse." By contrast, if you fail to save, you will be unable to take advantage of the wealth-increasing opportunities that come your way. After all, "It takes money to make money."

The Third Law of Gold: Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.

This one's pretty straightforward — stick to what you know, and where you lack knowledge and experience, seek the advice of those who are experts in the field. As the richest man in Babylon would say, "Better a little caution than a great regret."

In another of his parables, Clason tells of an inexperienced youth who invests a year's savings with a friend, a brickmaker, who travels overseas to buy jewels from the Phoenicians. Their plan is to sell the gems for a profit in Babylon, but the brickmaker returns home with worthless pieces of glass. The Phoenicians easily swindle him because he knows nothing of jewels. The entire investment is lost. But the lesson is learned. After saving for another year, the youth seeks the advice of a wise money-handler and his next investment is a success.

You'll have to read The Richest Man in Babylon to get the rest of the "Laws of Gold," but I'm confident you'll find it both enjoyable and enlightening. Let's move on to the "Cures for a Lean Purse," from the same book.

The Second Cure for a Lean Purse: Control thy expenditures.

In Clason's book, a student asks the richest man in Babylon how he can possibly save one-tenth of his income when his income is not even enough to pay all of his necessary expenses. To which, the rich man replies, I will tell you a strange truth: that what each of us calls our necessary expenses will always grow to equal our incomes unless we protest to the contrary.

Wow, this was carved in clay thousands of years ago. Can you beat it? No. It's the epitome of wisdom. The fact is, each and every one of us can manage on 90% of our earnings. And we can even manage on 70% of our earnings. We just have to make a budget and eliminate all expenses that are truly unnecessary.

Maybe you can't have all the cable channels. Maybe you can't get the fancy new car this year. Maybe you'll have to drive to the beach this summer instead of flying to Hawaii. But with your sacrifice you'll get your 10% savings. And then you can put that savings to work to earn more.

The Seventh Cure for a Lean Purse: Increase thy ability to earn.

This one's interesting, not only because it urges you to improve your skills and learning so that you might earn more in your trade (enabling you to save and invest more), but also because it tells you how to "think and feel" about making money. In Clason's book, the richest man in Babylon addresses his students as follows:

Preceding accomplishment must be desire. Thy desires must be strong and definite. General desires are but weak longings. For a man to wish to be rich is of little purpose. For a man to desire five pieces of gold is a tangible desire which he can press to fulfillment. After he has backed his desire for five pieces of gold with strength of purpose to secure it, next he can find similar ways to obtain ten pieces and then twenty pieces and later a thousand pieces.

Okay, what is the richest man in Babylon talking about here? He's talking about setting a very specific goal. And also about having a strong enough desire to be motivated to stick to your plan to attain that goal.

People who are serious about accumulating wealth, usually do. They seek out the knowledge they need, they control their expenditures, they save money, they set a goal, and they put their money to work to attain that goal. What's more, they stay motivated and stick to their plan because of a strong desire to attain their goal on time.

And isn't that what you're doing here at Dow Double Diamond? You've sought out Jim Patterson for his expertise with stock market trading plans. You've set a wealth goal. And because your goal is specific, you know how to use the DDD plan to attain your goal on time. And with your savings at work, you can monitor your progress and make adjustments to your plan, if needed, to stay on track for success. And of course, by saving 10% or more each month, you'll have an ever-increasing nest egg to earn for you.

Is there anything else? Yes. Patience. You'll need patience. But your goal will help you with that, too. Be sure to hold the specific monetary sum in your mind. Imagine having the money. Try to feel what it would be like to own it. To live it. That's the desire that keeps you motivated and enables you to have the patience necessary to succeed. It's also what programs your subconcious mind to bring the money to you (the subject of Dr. Maltz's Psycho Cybernetics, which we'll discuss next month).

In closing, let me say that the DDD plan cannot help you attain your wealth goal overnight, but it can help you succeed over 5, 7, 10, or 12 years. And so let me encourage you to stick with it. Don't be deterred. Invest for the long term. Control your expenses. Save at least 10% of your earnings. Put that money to work. And stay focused on your goal.

If you'll do this, you just might wake up one day and discover you're the richest person in (name of your city).

Sincere regards,

Dick Sanders