the richest man in atherstone

I'm a little over a year into my 5 year mission to increase my wealth. I've gained a lot of knowledge along the way and enjoy the sense of security that comes with actually having savings! I thought it would be useful to summarise the past 12 months by compiling a top 10 list (everyone loves lists!) of my most successful money-saving and money-making ideas.

1. Get organised

   Once you've decided that your going to take an active interest in your money, the first thing you need to do is get yourself organised. Go through your paperwork and find out exactly where you stand financially. Any assets that are performing poorly and look like they won't do any better in the future should be liquidated (cashed) to use in more profitable investments. Consider keeping track of your finances using a software application such as GNUCash.

   For me, I had a couple of NS&I investment accounts that were earning around 3% interest, which I duly cashed. I also tried to cash a pension I had but didn't realise pension equity can only be released upon retirement!

2. Control thy expenditures

   If you've never changed your utility providers, you're probably paying too much for them. Make a list of all the companies you pay on a regular basis. This should include Gas, Electricity, Telephone and broadband ISP. Seek out alternative providers that will provide the same thing at a reduced price. It looks daunting but tackle each expense one at a time over the course of a few months.

   I significantly reduced my telephone (part 1,2 and 3) bill and broadband (part 1 and 2) bill my switching suppliers. I also reduced my gas and electric bill (part 1 and 2) by doing the same thing. I am paying more than I need to for my mortgage, but we're planning on moving house soon so I will change mortgage when we move. I tried to save a small fortune by quitting smoking but failed miserably. I shan't give up though and plan to be clean of tobacco by the time I reach 30.

3. 10% of all you earn is yours to keep

   This is my favourite tip. Every month, as soon as you get your wage packet, take 10% of it for yourself. To most people this sounds difficult. I was no exception. I was struggling to live on all my salary every month, but once I got myself organised and reduced my expenditures, I was surprised how easy it was to put 10% of my salary away in a savings account each month. A year later, I don't even miss it! I'm living on 10% less than I earned before and feel wealthier. Open the best savings account you can find. Transfer the money you liquidated in step 1 to your savings account. Add 10% of your salary to it each month. Watch it as it earns you interest. Speaking from experience, its a deeply satisfying experience.

4. Get out of debt

   If you're in debt, your priority is to pay off your creditors. I've never been in debt (except my mortgage), so I can't really speak from experience. However The Richest Man in Babylon suggests witholding an additional 20% of your salary each month to get out of debt, as well as keeping 10% for yourself. Is it possible to live on just 70% of your salary? The honest answer is 'I don't know' but other tenats in this book have worked well for me so I would be inclined to support this idea. I would also suggest that, if possible, you transfer all your debt to a product with the lowest interest rate you can find.

5. Accumulate an emergency fund

   The first thing I did when I started saving 10% of my salary was to create an Emergency Fund. This is a lump sum of money that can be used in exceptional circumstances to dig yourself out of hole. Uses include redundancy, surprise tax bills and surprise car or house maintenance expenses. Ideally, this money will never be used. It will just sit in your savings account earning interest indefinetly. Should the worst come to the worst, however, you will have money to cover any surprises.

   I saved £4'500 for my Emergency Fund, which roughly equates to 3 months living expenses. I would recommend an Emergency Fund of 3 months living expenses as a minimum. Once you've saved your Emergency Fund anything in excess of this amount can be invested in different products or just kept in your savings account.

6. Make thy gold multiply

   Having organised your finances, reduced your expenditures and accumulated an Emergency Fund, you're now ready to find some investment vehicles for your spare cash. Ideally you're looking for something that guarantees your 100% of your capital. Savings accounts are good for this but you've already got one of those.

   Consider opening an ISA (Individual Savings Account). The interest rates of ISA's are comparable to savings accounts but you don't have to pay tax on your earnings. However, there are limitations to how much you can save. An ISA wasn't an option to me as my mortgage uses my ISA yearly ISA limit.

   Regular Savings Accounts can offer up to 10% interest rates but there are often limitations to how much you can save and penalties that are imposed if you don't follow all the rules. Always read the terms and conditions.

   If you are happy to risk your capital, you may want to consider investing in stocks and shares. Investing in shares of a company means that you own a percentage of that company. You can make money if the price of your share increases, which happens when the value of the company increase. A lot of companies also pay periodic dividends to shareholders. WARNING: Share prices fluctuate and you could lose your capital if the company winds up. Only use money you are prepared to lose.

   This is by no means an exhaustive list. Always keep you eyes peeled for new financial products.

   After I'd finished accumulating my Emergency Fund, I continued saving up another £1'500 before investing £1'000 in NS&I Premium Bonds and using £500 to invest on the stock market. Premium Bonds are a bit like a prize draw. They offer a (small) chance of winning £1'000'000 and a bigger chance of winning smaller prizes, the minimum being £50. I also invested £500 on the stock market, the main reason being to increase my knowledge of it. It was money I could afford to lose, which is just as well, because I've lost around £100! However, I do feel that I've gained a valuable insight into stock trading and have learnt a lot. I also think the company I invested in is capable of going up in value over the next year. I've also recently opened a regular savings account with Lloyds TSB. The Monthly Saver offers an 8% interest rate and there are limitations to how much can be deposited per month but there are no penalties for withdrawing your money early. I'm going to transfer my Emergency Fund over to my Monthly Saver over the course of the next 12 months.

7. Keep an eye out for free money

   Some people say that free money doesn't exist. 'There must be a catch' is a phrase I hear very often. My experience has shown me that free money does exist but it is very difficult to find. I'm not talking millions of pounds here but it is possible to make £10, £20 or even £100 or more by taking advantage of offers aimed at the consumer. For example, I got myself a cashback credit card that gives me a percentage back of what I spend. The Alliance + Leicester gave me £100 to open a current account plus an extra £50 because my mum referred me to them. A website (Quidco) offered me multiple £20+ incentives to make a £10 bet. The deals are out there, it's just a matter of find them. The only word of warning is to always ensure that the offer is safe and is backed by a legitimate company. Common sense always prevails.

8. Don't spend more than you have to

   Whenever you buy something always make sure you get the best value for money. When I last got my car insurance, took an hour or so to get quotes from as many suppliers as I could. I also filled in my details to a number of 'broker' websites that retrieve multiple quotes from lots of companies for just filling in a single form. If you're going to have to pay for a phone call, get a quote online instead. Remember that emails, in general, are cheaper than phone calls. If you have to phone a company, don't use an 0870 number. They're expensive. Find a regional number instead. Try to haggle whenever you can. Don't worry about being embarrassed - the worst they can do is say 'no'.

   Always seek out the best deal. It takes a little more time but its worth it both for the money in your pocket and the feeling of satisfaction you get after completing a good deal.

9. Don't stop learning

   Things change all the time. If you don't keep up to date, you could lose out. Personally, I enjoy learning about new financial products, improving my understand of financial jargon and seeking out the best deals. I also thing that part of the learning experience is to take action and do something. It's one thing learning the theory to get a sound foundation but you only learn the ins and outs by doing it. That's one of the reasons I invested in the stock market. I'd read a number of books and articles and taken advice from those in the know, but nothing compares to how much I learnt when I actually put my money down and bought some shares. Making the decision forced me to find out all I needed to know about the company I invested in and losing money on my shares gave me the incentive to find out where I was going wrong. Mistakes are good. We all make them and, as long as we can take something from our mistakes, we get better. If I hadn't took that leap, I'd be £100 better off but my knowledge of the stock market would be vastly lower than it is now. I treat it as good investment. Always be ready to learn and always be ready to try something.

10. Don't love money more than yourself, your family and your friends

    My wife and I went through a bad patch time a while ago and it was mainly down to my penny-pinching. I would try to save every penny I could, which meant we never went out, never treated ourselves and hardly ever enjoyed ourselves. Never put money before your life. This doesn't mean spend all your money on your family and friends. It means budget accordingly. Don't neglect your family holiday for the sake of a few hundred quid but, on in the same vein, don't go on the most expensive cruise you can find for the hell of it. Save and spend. Don't sacrifice your life for your money. What's the point in being the richest man in the graveyard?