Advices from Babylon for Those with Financial Problems

If you are having financial problems or want to have an idea about finance, the first book you should read is The Richest Man in Babylon. Below you can find some summary of the recommendations given in the book.

So let’s start.

You must secure your source of income for your future. Look at the old people, remember that after a while you will be one of them. Invest your savings very carefully so they don’t get lost. Save money so your family can meet their needs when you leave this world. If you make small payments regularly, you will be able to provide such protection. A frugal person would never delay putting aside a large amount for such a clever reason. Consult knowledgeable people for ideas. Listen to the advice of people whose business is related to money. 

Although advice is given for free, it is important to pay attention to what advice is sought from whom. The cost of seeking advice from someone with no experience in savings may be to lose all savings.

A small safe return is always better than risk. High interest rates can cause you to lose all your money. Stay away from them. 

Wealth also grows from a small seed, like a tree. The first money saved is the seed of the wealth tree. The sooner this seed is planted, the sooner the tree of wealth begins to grow. If this tree is fed with regular accumulation, it will have a shade to lie under with pleasure as soon as possible.

Enjoy life while you’re here. Do not force yourself too hard or try to save too much. If you can only keep a tenth of what you earn, be satisfied with that. Do not be stingy while spending. Life is beautiful and full of things to enjoy.

It is necessary to spend only nine tenths of what is earned and accumulate the rest.

Personally, when I started using nine-tenths of my earnings, I didn’t feel like I had less money than before. And soon my money seemed to get more and more. Undoubtedly, the person who does not spend all of his earnings will get money more easily after a while. On the other hand, money escapes from one whose wallet is empty.

What do you desire most? Is it the fulfillment of all your wishes every day, jewelry, better clothes, better food, things that go as easy as they come? Or do you want more permanent things like gold, property, trade, income generating investments? The dollars that come out of your wallet allow you to get the first set of things, and what you leave in your wallet allows you to access the second set.

It is necessary to eliminate unnecessary expenses by making budget planning, so that you do not spend more than nine tenths of the money earned.

What we define as “necessary expenses” increases according to our income as long as we do not make the opposite effort. Do not confuse your desires with real necessary expenses. Each of us desires more than our earnings can deliver. Even if we use all the money we earn to meet our desires, we still have unmet desires. Man’s desires never end. Desires are usually instant pleasures, whereas accumulation helps for a lifetime.

We should make our money work for us. We should increase our savings with investment. 

The first principle of a good investment is the security of the capital. Is it okay to aim for a bigger profit if your capital is likely to be lost? Obviously not. Don’t let your desires to get rich quick get you on the wrong track.

When investing with the money you have saved, take precautions and do not trust yourself. It is much better to take the opinion and advice of those who are used to using money to make a profit. Such recommendations are free and their value is the amount you are willing to invest. Because it will save you from losing that amount of money.

One of the remedies for a weak wallet is to not let your wallet empty after it is full. Only invest your money in ways that your capital is safe and you can get it back whenever you want. Consult the knowledgeable and experienced people for ideas. Their knowledge and experience prevents you from making precarious investments.

Have your own house in a neighborhood where you can pay the mortgage instead of sitting in a rental.

Someone who acts by the rules of wealth should think about the upcoming retirement days, must make fundraising plans and her investment must be safe for years. She should arrange them in such a way that she can easily access the money when she needs to use it.

Look to create an income now for your old age and for your family’s needs.

Generalized goals cannot go beyond weak wishes. A man’s desire to be rich doesn’t make much sense. But a man’s desire to have five grams of gold is a tangible goal, and therefore it is likely to be achieved. After obtaining five grams of gold, he can find 10 grams of gold, 20 grams of gold, and a thousand grams of gold with similar methods, and then he will be rich. By trying to achieve a small goal, he learns to secure a large amount. 

Wealth happens this way: first with small quantities, then more can be achieved with large quantities. Goals must be clear and defined. If goals are too much, too complex, or too difficult to achieve, they will not serve their purpose.

Work by nurturing your own strengths, become wiser, gain more skills, and respect yourself. Thus, you can gain the confidence you need to achieve your carefully shaped goals and increase your earnings.

The wealth that comes quickly disappears in the same way. Wealth that comes slowly brings pleasure and satisfaction to its owner, because it is the product of knowledge and persistent purpose.

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International Trade and Trade Barriers

When exchange is voluntary and free, both the buyer and the seller benefit. When you buy milk, the milkman earns money and you have milk without a cow. Voluntary free trade creates assets because it is mutually beneficial. Asset is the total value of everything owned.

In an experiment conducted at the Foundation for Teaching Economics, a group of participants were given random objects and asked to value them. Then the group members freely bought and sold their objects. After a while, the group was again asked to value the objects they owned. The second sum of values was higher than the first. Thanks to voluntary free exchange, asset was created without adding anything new.

International Trade

International trade generates mutual gain and wealth creation. Before the Second World War, trade agreements between nations were mostly mutual. Private benefits were mutually preserved and trade barriers such as import and export duties were mutual. However, the benefits of free trade were not understood and nations turned to policies of isolation and protection of the domestic economy after the war.

Towards the end of the Second World War, many representatives of the free industrialized world gathered in the town of Bretton Woods in New Hampshire to address economic problems that often cause international disputes. The conference created the International Monetary Fund (IMF) and the World Bank, but did not produce a trade organization to encourage international cooperation. In 1947, many countries, including the United States, came together to form the General Agreement on Tariffs and Trade (GATT). The goal of GATT was to reduce trade barriers so that member countries could benefit equally from free trade.

With the growth in international trade, living standards in the contracting countries have increased. In 1995, GATT became the World Trade Organization (WTO). Under the rule of GATT and then the WTO, more and more countries came to support the reduction of barriers and free trade. As a result, international trade continued to expand and many countries took advantage. For example, Ireland, one of Europe’s poorest countries, joined the EU and became one of the richest thanks to international trade.

Situations Adverse to International Trade

Despite the obvious benefits, there are also those who are against international trade:

• Environmentalists worry that production will increasingly concentrate in countries where there are fewer regulations to protect the environment from pollution and damage to natural habitats.

• Trade unions oppose free trade, arguing that production will be shifted to low-wage countries where there are not many unions, and therefore their members will be negatively affected.

• Human rights activists oppose free trade because of the shift of production to countries where working conditions are very poor and often inhumane, where workers cannot find the same rights and privileges in industrialized countries.

• Politicians and voters concerned about the damage to national sovereignty oppose free trade because decisions affecting the nation are made by an international organization that is not subject directly to the public.

Trade Barriers

Countries sometimes impose taxes or limits on international trade, or even prohibit it. Why is that? Although voluntary trading is mutually beneficial, sometimes only a certain group carries its costs. The public may be overly interested in protecting their industries, increasing tax revenues, protecting the environment, or even creating social change. Sometimes one country may limit its trade in order to punish another country. Customs duties, quotas, and embargoes are among the tools a country uses to fulfill its various goals.

Customs Duties

Customs duty is a trade tax. It can be used to increase government revenues or to benefit a particular sector of the economy. If your industry is facing foreign competition, you can put pressure on Congress to impose customs duties on imports. For example, the US steel industry was protected from foreign competition for years, thanks to tariffs. In 2007, India imposed tariffs on rice exports to avoid famine. The Smoot-Hawley tariff, introduced in 1930, was intended to protect American industry and to increase tax revenue much needed by the state.

Customs tax, on the other hand, has some downsides:

• Customs duty often has anticompetitive effects, supporting waste and inefficiency.

• Customs duties to generate revenue often cannot increase tax revenues because people stop buying expensive imported products.

• Imposing customs duties on exports can give producers a reason not to produce.


Quotas are limits in trade. Rather than imposing a tax on imports, a quota may be applied to limit the number of goods imported. In the 1970s and 1980s, American car manufacturers and labor unions supported government quotas on foreign car imports to limit competition and protect their own businesses. The result was higher price and lower quality.

Ultimately, German and Japanese companies set up their factories in the USA. Thus, domestic producers faced more competition in their own countries. Trade unions also suffered as foreign companies set up their factories in states where the unions were less effective.

Quotas also create other problems:

• They do not bring tax revenue to the state, they bring more responsibility.

• Those who try to avoid quotas encourage smuggling, thus creating a black market.

• Quotas can be manipulated by foreign firms to restrict competition from other foreign firms. For example, if a quota is applied to German cars imported to the USA, the German company that filled the quota first would prevent other German companies from competing in the American market.


An embargo is a ban on trade with another country. The purpose of an embargo is usually to punish a country. The embargo we are most familiar with may be the US embargo on Cuba. After the communist revolution and the Cuban Missile Crisis, the US enacted an embargo banning all trade with the islanders. Even if these events are far behind, the embargo continues. To understand why it still continues, we can think again about who is benefiting from the trade embargo.

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Introduction to Economics # 1

Opportunity Cost

Whenever you use a production factor it will have a cost. Why is that? The factors of production are limited, not unlimited. As a result, when you decide to use land, labor, capital, or entrepreneurship for one purpose, you lose the ability to use it for another purpose. Take, for example, labor – your own labor – as your own resource. Let’s say you can spend an hour writing a book, teaching a lesson, or knitting a cardigan. Suppose you prefer to knit a cardigan. You can neither write a book nor teach during this hour. If your second-best option is to write a book, economists say that the opportunity cost of an hour spent knitting a cardigan is an hour you can spend writing a book. Here, the opportunity cost of knitting a cardigan for an hour is reading a book for an hour.

Implicit and Explicit Cost

Opportunity cost is sometimes called implicit cost. In addition to the easily calculated explicit costs of a production activity such as labor, raw materials and overheads, there are also implicit costs that are more difficult to calculate.

Considering the Opportunity Cost

For example, on a beautiful Friday morning, you think, “I can go to work as I should, stay home and sleep all day, or fly to Hawaii, hang out at the beach and dive.” Imagine you decide to go to Hawaii and your second-best option is to go to work. What was the cost of your trip?

You paid for a taxi to the airport, airfare, hotel all-inclusive accommodation, and diving. These are the first to come to mind. So, was that your only expense? No. You’ve also given up any money you can earn by working. Opportunity costs give bad results. You should always be sure to take that into account when planning.

Assumptions in The Economy

Economists make some assumptions when talking about their favorite subject. They expect you to know (and accept) these assumptions. Important three of them are as follows:

1.Nothing else changes. When economists argue that “If income taxes decrease, consumption increases.” it should be understood as “If income taxes go down and nothing else changes, consumption will increase.”. You see the difference between the two expressions, right? The phrase “and nothing else changes” is also known as the ceteris paribus conjecture. Ceteris paribus, translated means “while all other elements are unchanged”. So, when reading about economics, keep in mind that all statements about cause and effect relationships are written with the assumption of ceteris paribus.

2. People are rational and act rationally. Another assumption that economists make and love is that people behave rationally. Economists assume that people make their choices considering all available information, as well as the benefits and costs of that choice. Also, economists assume that the choices make sense. The assumption that people behave rationally becomes the subject of debate between different schools of economic thought, but it is a useful assumption for most economic decisions.

3. People are selfish… The last assumption of economists is that people are self-interested. When it comes to deciding, people think of themselves first of all. Pure altruism is not possible in the economy. Economists cynically assume that human behavior is driven by self-interest. For example, suppose a grenade was thrown into a moat full of soldiers. Let a soldier jump on the bomb, sacrificing his own life to save the others. According to the economists, this soldier immediately calculated the marginal benefit and marginal cost of his decision, decided that the marginal benefit of rescuing his comrades would be more than the marginal cost of his life, and jumped on the bomb in a utilitarian act that maximized his personal interest. He saved his friends to maximize his usefulness as a soldier.

The assumptions made by economists are open to criticism and debate. Many critics think the field of economics tends to be too abstract and theoretical to have real-world values. The failure of most economists to predict the latest economic crash supports the notion that economics ignores human psychology.

Economics as a discipline has reached a turning point, and the assumptions that economists cherish require careful examination. Instead of being tidy, abstract and mathematical like physics, economics should be messy, complex and organic like biology.

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