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Budgeting that works: Arkad’s Simple Rules

This budgeting frame is particularly appropriate when paying off ‘negative wealth’. When people have debt negative wealth, the customary advice is ‘don’t save; throw everything to pay it off’. I happen to disagree with this and from the very first days of my financial awakening I set myself two goals: one pay negative wealth and pay it fast; and two build up an emergency fund and savings. As it turned out I am in good company and Arkad, the richest man in Babylon, also agrees with me. Arkad’s advice to people who have negative wealth and wish to become wealthy was the following:

Ten percent of all you earn should be saved and invested.

Twenty percent of all you earn should be used to pay debts negative wealth– if the amount is insufficient one should negotiate with their creditors firmly and convince them that this all that they can afford but that they will pay diligently.

Seventy percent of all you earn should be used to cover all living expenses.

Currently we put 21% of our monthly net income to pay off negative wealth; 14% of our monthly income is saved and a proportion of this is invested; and we cover all our living expenses using the 65% of our monthly income that is left.

I have mentioned before that the real beauty of this system is that it uses percentages rather than absolute numbers. I will not change the proportions – although we observe these only when applied to our regular monthly income; any occasional earning, mainly husband’s, are thrown at the negative wealth at present. Using this budgeting frame also focuses attention on the fact that the way to increase payment(s) in absolute terms one ought to earn more.

2 thoughts on “Budgeting that works: Arkad’s Simple Rules”

  1. At least with this method you don’t “thrift” yourself into paralysis – getting yourself so entwined in a “Never Spend” mindset that the money stops flowing through you and you become a bottleneck to your own financial goals.

    An emergency fund gives you the wiggle room to survive the ebbs and flows of life without resorting to, often expensive, lines of credit.

    “The Ancients” have all the wisdom – if we are willing to hear it

  2. Quite! Also the money that is invested starts generating wealth – sort of snowball, really. I was thinking about mythology today and it seems to me that in money matters the myth of Sisyphus is important. Except that one can reach the top of the mountain and start rolling the bolder down…


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