Shaq and The Richest Man in Babylon have at least one thing in common.
They paid themselves first.
In George Clason’s personal finance classic, The Richest Man in Babylon, he writes:
“A part of all you earn is yours to keep. It should be not less than a tenth no matter how little you earn. It can be as much more as you can afford. Pay yourself first.”
Using average values for income and a few key expenses, here’s what a simplified monthly budget might look like.
Revenue (Income) $4,000
Expenses (Spending)
Housing ($1,030)
Food ($550)
Clothing ($134)
Student Loan ($393)
Net Income $1,893
That $1,893.00 left over in your checking account at the end of the month is what you have to play with. You can save it for retirement and pay off more debt. Or you can pick up the bar tab for your buddies and buy the newest iPhone. Under Clason’s guidance, we should save and invest at least $400 of the profits, 10% of our monthly income.
Problem is, making decisions on what to do with the profits every month means you’ve already lost. Decision fatigue is a real thing. That’s why President Obama wore the same blue/gray suits every day, he saved up his mental decision-making capacity for the most important things. Making constant decisions on what to save and what to spend is exhausting. And if it’s easier just to forget about it until next month, remember that doing nothing is a decision too.
Instead, think of yourself as a business. Change your mindset and commit to paying You, Inc. first. Just like you have to pay the landlord and the grocer, make You, Inc. an expense too.
Below is what this flipped mindset looks like on our monthly budget.
Revenue (Income) $4,000
Expenses (Spending)
You, Inc. ($400)
Housing ($1,030)
Food ($550)
Clothing ($134)
Student Loan ($393)
Net Income $1,493
Now that you’ve built in your saving, the net income is yours to spend.
We all have different circumstances and short-term financial goals. For some, the $400 to You, Inc. should be used to pay off high interest credit card debt. For others, it can fund an IRA building the retirement nest egg.
Commit to paying yourself first and frontload the decision making so you know where it will go. Automate saving as much as possible so systems do the work for you. If your short-term goal for You, Inc. funds is to max out your IRA, set up automatic transfers to your investment account and remove yourself from the process.
“Money is governed today,” says Clason, by the same laws which controlled it when prosperous men thronged the streets of Babylon, six thousand years ago.” And Shaquille O’Neal is living proof.
Shaq is even more dominant off the court than he was on it. Shaq is a prolific investor and has built an empire. His portfolio has included stakes in 155 Five Guys restaurants, 17 Auntie Anne’s, and 9 Papa John’s. He owns 40 gyms, 150 car washes, and even bought a stake in Ring years before its $1B sale to Amazon.
Shaq’s vast portfolio boils down to the fact that he paid himself first. He sums up his saving habit in the below video with a single piece of paper. Whatever you make, put some aside to save and invest. Clason says at least a tenth, but if you want to build above average wealth, then save and invest even more. Try to be like the Financial Samurai and save as much as you can until it hurts.
Shaq developed the money mindset needed to see himself as a business, pay himself first, and let his wealth grow like a tree.
To leave you with one last quote from the book:
“Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner you bask in contentment beneath its shade.”
Thanks for reading!
To read more, click here for The Richest Man in Babylon (affiliate link, thanks for supporting!)
And here for more on decision fatigue and here for its impact on court proceedings.
Also shout out to Shaq for putting on a great show as DJ Diesel!
Citations for monthly average income and expenses:
Income, Housing Costs, Food, Clothes, Student Loan Payments.