Chapter 6: Damn you, Excel.

Damn you, Excel. And damn the financial model that I have created. I could have been rich by now. Rich.

A single tear falls on the space bar of my ergonomic keyboard and traces sideways across the Alt Gr key that nobody uses because it never really does anything when you press it.

I have the figures in front of me. If I had followed the 70%/20%/10% mantra, that is

• live on 70% of your income
• put 20% towards debts (or - when the debts are paid - into a "dream bucket" i.e. saving for long term ambitions, or once-in-a-lifetime treats)
• put 10% into securities (savings and investments) that can not be touched until retirement

If I had followed these simple rules, and done nothing more exciting that saved the money into a cash ISA, say, then

• I could have paid all of my debts off in April 2005 (which is three years earlier than I actually did and I would have already saved £6,500 in securities, by that point, as well)
• I could have saved anything up to £50,000 in my dream bucket today (assuming that Amy and I still spent about £10,000 on our wedding, and that our parents still gave us the same contribution).
• I would have an additional £24,800 in savings and investments

You might be asking the question, "Could you really have lived off 70% of your income?" Well, looking at the figures, I admit that the first year would have been a struggle but from that point onwards it would have been plain sailing, without a doubt. I would have had to trim some of the fat from my lifestyle, nothing more onerous than that. That is the saddest thing - I probably wouldn't have noticed the difference because the things I spent money on were not the things that gave me greatest pleasure, anyway.

Isn't this exercise a bit depressing? Pointless, even, given that I can not influence the past. Why intentionally create the pain of disappointment?

I think, of all of the books that I have read, Awaken the Giant Within by Anthony Robbins has been the most inspiring and influential. Anthony Robbins talks a lot about the motivating forces of pleasure and pain and how you can harness these forces in your life. There is one particular quote that neatly summarises the principle.

If you've ever been in a destructive relationship and finally made the decision to use your personal power, take action and change your life, it was probably because you hit a level of pain you weren't willing to settle for anymore. We've all experienced those times in our lives when we've said, "I've had it - never again - this must change now." This is the magical moment when pain becomes our friend. It drives us to take new action and produce new results. We become even more powerfully compelled to act if, in that same moment, we begin to anticipate how changing will create a great deal of pleasure for our lives as well.

Awaken the Giant Within (p.54) by Anthony Robbins

I have been in a destructive relationship with money for the past 8 years and it is only really by shining a spotlight on that relationship that I have been able to generate enough pain to change my behaviours.

Chapter 5: 500,000 is a very big number.

500,000 is a very big number. So big, in fact, that I am going to conveniently usher it to one side for the time being so that I can talk to you about money and my history with money.

It is decidedly un-British to talk about money; I feel squeamish at the thought of writing about it. I can not write this blog without writing about my finances in detail though because I can not achieve my Primary Aim without money. It is fundamental to my success.

You might feel squeamish or intrigued reading, I don’t know.

I became financially independent when I left university 8 years ago. I started off in September 2001 with about £5,000 of student loan debts, £2,500 credit card debt, and a £1,500 overdraft.

I don’t have the exact figures to hand but my first graduate job as a software engineer paid an annual salary of about £17,500. The figures below show my approximate gross salary earnings (accounting for mid-year salary reviews, et cetera) each year since.

2001-02 (£17,500)
2002-03 (£21,000)
2003-04 (£24,500)
2004-05 (£26,500)
2005-06 (£28,500)
2006-07 (£43,000)
2007-08 (£58,000)
2008-09 (£78,000)

So, I was worth minus £9,000 in September 2001. How much am I worth now? Go on, take a guess. £30,000? £40,000? £50,000?.

How about if I said £26,000? That sounds okay, doesn’t it? It’s perhaps a bit on the low side, but not too bad. Okay, now what if I said that figure includes a total parental contribution of £27,000 (comprising £2,000 in 2004 after I got back from travelling in South America, and £25,000 when Amy and I got married this year)?

Hmmm, so that means that without the parental contribution, I would be worth (go on, you can do the sum in your head) minus £1,000.

I have earned a shade under £300,000 over the last 8 years and I am worth minus £1,000.

Oh, dear.

The funny thing is that I don’t remember the casinos, the champagne, and the fast cars. I don’t remember eating caviar from the Geisha’s belly button or snorting cocaine like it was Sherbet dab. I lived in shared accommodation, ate average food, and drove a 1.4 litre Renault Clio.

How did I spend that much money? The answer is simple. I never set any money aside, so it just seeped away. When I left university, I was fed up of being a poor student. I wanted to have nice things, I wanted to be comfortable and I knew that my salary was going to increase anyway so I decided that paying off my credit card could wait. Why should I suffer now?

It was a delusion. The sad truth is that every time I got a raise, I used it to improve my standard of living. I got a slightly better car, or moved into slightly better accommodation. I never tackled the debt.

It is only within the last two years that I have started to learn about money management and it is only within the last six months that I have started to actually understand it. I originally read a book called The Rules of Wealth by Richard Templar which ultimately led me to my first fundamental insight.

Money management is primarily an emotional discipline, not an intellectual discipline.

That might sound obvious but it has taken me until the age of 30 to work it out. (I want to share this with you in case you are also struggling to understand why you are worth so little financially even though you have worked in a respectable job for the majority of your adult life.)

I realised that I had lots of positive associations with spending and lots of negative associations with saving. What did I do to reverse those associations? I decided to look back over the last 8 years and run a simulation. When I read The Richest Man in Babylon by George S. Clason, it recommended that you should aim to live on 70% of your income, use 20% to pay your debts (if you have any), and put the remainder into retirement savings.

I ran that simulation from 2001-2009 and assumed that any money I saved went into a basic savings account that earned interest at an annual rate of 0.5% above the Bank of England base rate.

How much do you think I would be worth now if I had followed those rules? (I’ll tell you next time.)

Chapter 4: So, did you try it?

So, did you try it? (Writing your Primary Aim, that is.)

If you did, you probably felt the same overwhelming sense of smug self-satisfaction that I did after I’d written my Primary Aim. In fact, I was so smitten that I rushed out and bought a clip-frame so that I could hang a copy above my desk and gaze at it.

The honeymoon period lasted for about a week before it suddenly struck me that simply staring at a clip frame and admiring my own vigorous brand of sincerity would not, in and of itself, bring me success.

I actually needed to do something.

Reading through my Primary Aim over and over, I started to think about my strengths and weaknesses in relation to the specific individual aims I had written. I wanted to take a balanced view but all I could see were two gaping holes:

• “I want to enjoy my work; I want it to challenge and excite me.”
• “I’ll need quite a lot [of money] to build the house I envisage (maybe £500,000 or more)...”

I don’t enjoy my work; it doesn’t challenge and excite me. And I don’t have £500,000 and I don’t know how to get £500,000.

So, I wrote down two simple questions.

• What can I do for a living that will challenge and excite me?
• How can I generate £500,000 in savings within 2-5 years?

(I don’t have the answer, of course. This is a work in progress, remember.)

Chapter 3: I will never sail around the world single-handedly.

I will never sail around the world single-handedly. I will never even try. I have no interest in sailing, plus I get sea sick. The logistics of mopping up vomit and steering at the same time would probably be too complicated.

I look at people like Ellen MacArthur with a distorted sense of admiration and I think to myself, “I have no interest in sailing but the thing I admire about you is that you know exactly what you want to do and who you want to be.”

I confess I have not read Ellen MacArthur’s biography. (I probably will, now.) I can safely predict that she has a Primary Aim, though. What is a Primary Aim? Michael E. Gerber defines the term Primary Aim in The E-Myth Revisted.

What would you like to be able to say about your life after it’s too late to do anything about it? That’s your Primary Aim. (p.137)

When I read The E-Myth Revisited I realised that I did not have a Primary Aim. I began to realise that the permanent sense of disillusionment with my life and disappointment with myself partly stemmed from having no definition of success against which to measure myself. All I had was a set of inflexible and unrealistic rules, like, “I need to do everything perfectly otherwise I am a failure.”

I’ll talk about some of those other unhelpful rules in another chapter but, for the moment, I wanted to share my Primary Aim with you and explain how I wrote it.

Michael E. Gerber asks a series of questions in The E-Myth Revisited (p.139) that help to elicit your Primary Aim. If you have the time, try this exercise yourself.

• What do I wish my life to look like?
• How do I wish my life to be on a day-to-day basis?
• What would I like to be able to say I truly know in my life, about my life?
• How would I like to be with other people in my life – my family, my friends, my business associates, my customers, my employees, my community?
• How would I like people to think about me?
• What would I like to be doing two years from now? Ten years from now? Twenty years from now? When my life comes to a close?
• What specifically would I like to learn during my life – spiritually, physically, financially, technically, intellectually? About relationships?
• How much money will I need to do the things I wish to do? By when will I need it?

Here is my Primary Aim which I wrote in May 2009:

I want to be a good husband, a good father, and ultimately a good grandfather; and I want to create something every day.

I want my life to be safe, secure, comfortable, surrounded by beauty, an example of achievement and commitment, and imbued with artistic integrity.

I want family life and creative expression to come first. I want to enjoy my work; I want it to challenge and excite me.

I want sufficient routine and structure to promote health and emotional and spiritual discipline, and sufficient variety to stimulate and excite my senses.

I will always want to feel the security of a warm, loving relationship; and that I am being all I can be creatively and intellectually.

I want to be constant, reliable, caring, and thoughtful with the people in my life.

I would like people to think of me as a quiet inspiration.

In two years’ time, I would like to be building a home and a business.

In ten years’ time, I would like to be raising a young family in a beautiful home, and pursuing my creative talents.

In twenty years’ time, I would like to be watching my children flourish into adulthood and enjoying a mature, loving marriage.

When my life comes to a close, I would like to be relatively free from pain, surrounded by a loving family and familiar things.

During my lifetime, I would like to learn compassion, and the path of an untroubled mind. I would like to learn respect for my body, how to nurture it, and how to alleviate it from pain. I would like to unlock the true secret of wealth. I would like to develop a deep appreciation of art (especially sculpture, architecture, photography, and painting). And I would like to gain fundamental insights into the human condition. I would like to learn the art of a good marriage, and the art of being a good father and grandfather.

I'll need quite a lot of money to build the house I envisage (maybe £500,000 or more) but then after that maybe £50,000-£100,000 a year or less, reducing over time as I get older.