the richest man in atherstone

I was reading through 'The Richest Man in Babylon' for the umpteenth time today and realised that over the previous 12 months, I haven't been following Clason's rules as closely as I should have been. I've included a couple of quotes from the book below that prompted me to reassess my saving system.

"...make your treasure work for you. Make it your slave. Make its children and its children's children work for you."

"Behold, from my humble earnings I had begotten a hoard of golden slaves, each labouring and earning more gold. As they laboured for me, so their children also laboured and their children's children until great was the income from their combined efforts."

The mistake I have been making is to not pump the interest I have earned from my savings back into my savings. You may recall that I last year, I set myself a target to save up £4'500 for my 'Emergency Fund'. I achieved my goal but I didn't use the interest earned for the same purpose. I'm not sure exactly what happened to it but I assume I must have spent it. I probably withdrew the extra to leave myself with a nice round figure of £4'500 at the end of the year.

Here lies the problem. I often have money bouncing around between my savings and current accounts. This is because I get a better interest rate with my savings account, so it makes sense to store cash that is not immediately required there. Obviously this leads to confusion over what cash belongs where as savings and expenditure money is constantly getting mixed up.

I decided that I needed to change my system to segregate my money into how it will be used. I opened two more Lloyds TSB Online Savers in addition to the one I use for my savings.

The first I called 'Cash'. This will be used for money due to be spent on my monthly bills and cash withdrawals. All my bills are Direct Debit and I know when the money will be debitted from my current account, so it will just be a matter of transferring the cash to my current account a day or so before the bill is due.

The second is called 'Expenditures'. I will use this account for yearly or irregular expenses such as home and car insurance, MOT, road tax, dentist bills etc. It will also be used for unexpected costs such as my car breaking down or tax underpayments. I've suffered both of these surprises in recent years and would prefer to be prepared for them if they should happen again.

Looking into the figures, I have calculated that each month I will make a deposit of £208 into my Savings Online Saver and £143 into my Expenditures Online Saver. The remainder, give or take a couple of hundred quid 'float' will go into my Cash Online Saver and transferred back to my current account in chunks whenever a bill is due.

I rearranged my money to reflect the changes I made as if I had started from the beginning of the year.

Now I should have no reason to 'lose' the interest I earn on my Savings and the children of my money will go on to create children of their own increasing my wealth as only compound interest knows how.