the richest man in atherstone

Earlier today, I was looking back at the origins of my journal and I discovered this post. Written just over two years ago, it describes my financial situation before I started my quest to achieve financial security.

Back then I had £4607.69 to my name (discounting my house and mortgage) from ten years of labour. Actually, this would have been more like £3'500 due to the fact I'd just been paid and the following months expenses would take a big chunk of that cash. I didn't have a clue when it came to my finances and up until then I didn't care much either.

Looking over this post, I had the opportunity to reflect upon the previous two years of my life and how far I had come in that time.

My assets (excluding house and mortgage) now stand at £9'700 - more than double what I had two years ago - and should reach over £11'000 by the end of the year.

This achievement, has come primarily by following Clason's primary tenet in his book 'The Richest Man in Babylon' - namely saving at least 10% of my income. Of course, his other principles have gone a long way to maximising my profits - finding good investments, safeguarding capital and increasing income to name but a few.

I originally created this website to document my progress as I devoted five years of my financial life according to the rules set down in Clason's fables and now I am approaching the half-way point I can look back at the last couple of years with pride.

These days I am a lot more financially-savvy. I enjoy looking after my money and still get a buzz when I see interest deposited in my accounts or earn a little extra income from an idea I've had. Granted, the nine-and-a-half grand I have accumulated is not a lot - I think I'd struggle to survive longer than six months with that - but the knowledge I've accumulated along this path is priceless.

I feel I have a sound foundation to support me as I move on to bigger and better things. The next phase is to create an income for myself and my family without relying on a job. Not a few quid extra spending money but a proper income from multiple streams that will not reduce our standing of living. This phase is imminent.

The birth of our third child has made my 9 to 5 job incompatible with my life. Despite a good remuneration, I am no longer enjoying my full-time job and am frustrated by the inflexibility of the hours. I frequently find that I don't have as much time as I'd like with my wife and each of my children. I can't be the father and husband I want to be and so something more flexible is now a necessity. The only way I can choose my own hours is to work for myself.

So that is what I am going to do.

Much like the compilation episodes that are strung together by television series producers when they haven't got any new material this post will take a look back over the previous 12 months and summarise my achievements for 2006.

January
In the first month of the year, I had a very unsettling experience with the ICICI bank, which resulted in them losing a customer for life. Conversely, I had a very pleasant experience with the Alliance + Leicester when they gave me £150 and my mum £50 simply for opening a Premier Direct Account.

February
The only month of 2006 in which I didn't make a journal entry.

March
I learned a very valuable lesson - that I shouldn't forsake my family and friends for money. Thirty pound spent on a nice meal in the company of loved ones is a fantastic investment.

April
April saw the launch of this website into the public domain. Previously, I had been updating my journal privately but I decided to publish it to the masses in the hope it would provide useful information and an entertaining read. Additionally, in April, I realised that I had not been following Clason's advice properly which resulted in me rearranging my finances.

May
May was quite a busy month for me. The money I had saved over the previous year or so was now available for worthwhile investments, so I set about finding some. I bought Premium Bonds and dabbled in the stock market for the first time by buying shares in my ISP, Plusnet. A week or so later, I increased my stake in Plusnet. I also opened a Monthly Saver account with Lloyds TSB, as well as writing a book review of 'The Richest Man in Babylon' by George S. Clason, writing an article entitled Top Ten Tips to Increase you Wealth and talking about my money box.

June
In June, I got a GE Money Credit Card, which gives me 3% cashback when I use it to buy petrol or groceries. I also tested a gambling strategy during the FIFA World Cup.

July
My biggest achievement of the year occurred in July - I stopped smoking. And the best part was it was much easier than I thought it would be (having failed many times before). I also updated the progress of my Plusnet shares and wrote a book review of Robert Kiyosaki's 'Rich Dad, Poor Dad'.

August
I decided to analyse Warren Buffet's letters to Berkshire Hathaway shareholders, which contain some great investment advice from arguably the world's best. The first letter I analysed was from 1977. I also decided what I would do with all the extra money I would have due to quitting smoking.

September
I analysed Warren Buffet's 1978 letter to shareholders.

October
A very busy month. I analysed Warren Buffet's 1979 letter to shareholders as well as releasing the prototypes of my Mortgage Calculator and Regular Savings Calculator to the world. I reduced my expenditures by changing my telephone provider and updated the progress of my Plusnet stock. I collected the cashback from my Morgan Stanley Credit Card and closed my A+L Premier Direct account. Finally, I began to cut down our grocery shopping bill and wrote an in-depth article on earning over £100 using Quidco.

November
In November, I continued to reduce our grocery bill as well as writing an article describing my Top Ten Tips. I had a bit of a moan about feeling constrained as I couldn't invest my money due to our house being on the market, however I did find a cracking savings account (IceSave) that I transferred my money to. November also saw me begin my 'doubling to a million' project and making my way to step 7. I also gave honourary mentions to other doublers I'd found. Click here to see all doubling posts.

December
December saw the first issue of my newsletter, I sold my Plusnet shares to BT and completed step 7 and step 8 of my 'doubling to a million' project as well as making some progress towards step 9. I described my experiment for super-unleaded petrol economics and published my financial report for 2006.

In summary, I feel I've achieved a lot over the last 12 months. It's certainly more than I achieved in 2005 and quitting smoking is one of the biggest achievements in my life.

Another year has begun and I wish you all a healthy, wealthy and happy 2007.

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.

My wife and I have had a bit of a torrid time, just lately. We haven't been happy with each other of recent times for many reasons, which I won't go into here as this is a 'finance' blog and not a 'feelings' blog.

The reason I am mentioning it is because one of my wife's criticisms of me is that I am too frugal. She explained that saving money is good but I have taken it too far, counting every single penny and forsaking my relationships to preserve my money.

She's absolutely right! We haven't been out together for a while, hell we haven't had a takeaway for yonks because I complain about the cost. I've been neglecting my friends and family for the sake of a few quid and I know that these things are and will always be much more important than money. I think I've been focused on saving and have forgotten about all the other things that are important to me.

In reality, I can now see that spending £30 on strengthening a relationship pays for itself many times over and at a much better rate than putting it in my savings account.

'The Richest Man in Babylon' also recommends that the reader does not forsake their family and friends in the quest for wealth. It is possible to both spend and save, as the following quotes from the book explain:

"Budget thy expenses that thou mayest have coins to pay for thy necessities, to pay for thy enjoyments and to gratify thy worthwhile desires without spending more than nine-tenths of thy earnings."

"Therefore, seven-tenths of all I earn shall be used to provide a home, clothes to wear, and food to eat, with a bit extra to spend, that our lives be not lacking in pleasure and enjoyment."

Although subtle, the message is there in the book. I need to invest in my personal relatioships just as much as I need to invest in my personal finance. I've never seen this message until now but now I intend to make sure I do not become a 'scrooge' in terms of money.

What's the point in being the richest man in the graveyard?

We've sorted out our differences now and love each other more than we have ever done before. I hope that this post will make readers think twice before they get into the same situation as me.