In 1926, George Clason wrote a book called The Richest Man in Babylon — one of the great success classics of all time. It’s the fabled story of a man named Arkad, a simple scribe who convinces his client, a money lender, to teach him the secrets of money.
The first principle the money lender teaches Arkad is: “A part of all you earn must be yours to keep.” He goes on to explain that by first putting aside at least 10% of his earnings — and making that money inaccessible for expenses — Arkad would see this amount build over time and, in turn, start earning money on its own. Over an even longer time, it would grow into a lot, because of the power of compound interest.
Make saving and investing a priority
The world’s most aggressive savers make investing money as central a part of their money management as they do paying their mortgage.
To get in the habit of saving some money every month, immediately take a predetermined percentage of your paycheck and put it in a savings account that you don’t allow yourself to touch. Keep building that account until you’ve saved enough to move it into a mutual fund or bond account or to invest it in real estate — including the purchase of your own home. The amount of money that is wasted paying rent without building any equity in a home is a tragedy for many people.
Investing just 10% to 15% of your income will help you eventually amass a fortune. Pay yourself first, then live on what is left. This will do two things: (1) it will force you to start building your fortune and (2) if you still want to buy more or do more, it will force you to find ways to earn more money to afford it.
Never dip into your savings to fund your bigger lifestyle. You want your investments to grow to the point that you could live off of the interest, if necessary. Only then will you be truly financially independent.
* Source: The Success Principles by Jack Canfield