Seven cures for a lean purse...

[dkf]

If every 99er followed these principles, the 1% wouldn't be so rich...

The Richest Man in Babylon: Seven Cures for a Lean Purse Part 1, Start Thy Purse to Fattening

In the third chapter of The Richest Man in Babylon the book lists and details "seven cures for a lean purse." I'd like to share those with you over the next week and add my comments to the already great insights this book provides.
Cure #1 of the seven cures for a lean purse is:
Start thy purse to fattening.

Here's how the book summarizes this cure:
For every ten coins thou placest within thy purse take out for use but nine. Thy purse will start to fatten at once and its increasing weight will feel good in thy hand and bring satisfaction to thy soul.

In other words, save 10% of what you make. In order to do this, you need to spend less than you earn (save a portion of all you make as The Richest Man in Babylon states it). I've found that much of America has this backwards -- they spend ten coins for every nine they make. ;-)
The book goes on to highlight an associated principle that I've found to be true in my own life:
Now I will tell a strange truth, the reason for which I know not. When I ceased to pay out more than nine-tenths of my earnings, I managed to get along just as well. I was not shorter than before.

----

There are 7 of these and they are the secret to building a nest egg that will bring you more security in life.

http://www.freemoneyfinance.com/2006/04/the_richest_man_7.html
http://www.freemoneyfinance.com/2006/04/the_richest_man_8.html
http://www.freemoneyfinance.com/2006/04/the_richest_man_9.html
http://www.freemoneyfinance.com/2006/04/the_richest_man_10.html
http://www.freemoneyfinance.com/2006/04/the_richest_man_11.html
http://www.freemoneyfinance.com/2006/05/the_richest_man.html
http://www.freemoneyfinance.com/2006/05/the_richest_man_1.html

[pscot]

1. It's hard to believe

that someone would unrecc this post, and yet my rec leaves it at zero.

[MineralMan]

2. It's probably because some have too little to implement this

idea. For many people, there is no way to save 10% of what comes in, since too little comes in to even pay for the basics.

[supernova]

3. These steps work in a stable economy

I was taught all of this things growing up. And I intended to use them scrupulously as an adult. These are worthwhile things to know and everyone should know them. But not everyone has financially literate parents willing to teach them.

The problem is we don't have a stable economy anymore. Even if you follow all these steps to the letter, you can still wind up underwater on your mortgage. With insurance (house and health) that costs too much relative to how much service you might get out of it. You can be laid off from your chosen career. Repeatedly. And thus the necessity of retraining, i.e. spending more money, on top of now starting out on a lower career rung again.

In a boom and bust economy, it is only possible to hang on by your fingernails for many people.

[dkf]

4. It is true that things are more precarious than they used to be.

But it's also true that if you can follow these principles you have a better chance of getting through the turmoil.

What are the downsides to at least trying?