The original PF blogger

This is a blog about some aspects of finance and it's my personal view, so to that extent it is a personal finance blog. However, it's not my intention that it should be a conventional PF blog, advising on how to save money or what investments to make, although I do ocasionally hold forth. Similarly, I am not going to tell you wash your dishes in the shower or to rent out your house as a cryogenics lab now that you've you turned your central heating down 273 times. Nor am I not going to narrate my "PF journey", although I do talk about what I am doing and sometimes why.

However, I do look at some of the many PF blogs and usually the ones that tell personal stories. It is interesting to see how so many people have either overcome financial adversity or simply have become incredibly focussed on their long term goals of financial independence and freedom. Writing about their financial lives, I assume, helps the authors to keep on target. They may not know it, but these people are in a long tradition that goes back at least 350 years.

The original PF blogger was Samuel Pepys. He started his secret and incredibly frank diary in 1660 at the age of 26, just before he started a new career in public service. It's not principally concerned with finance, of course, but money looms large in the background. His blog was readable by invitation only and the only person invited in his lifetime was himself, but he must have known that others would read it eventually (they first did so in the early C19th), since he wrote it in a standard shorthand system of the time. He records, candidly, his views on the government and government policy, his friends, colleagues and acquaintances as well as his many marital infidelities. For its time and place, all human life is there.

As well as being a fascinating source for historical events of the period, the diary reveals an inner world of concerns, motives and desires that resonate mutatis mutandis today as much as then. At first sight, Samuel Pepys is not an attractive character. His chief concerns are money, sex, music, theatre, politics, science and books, but above all himself. His moral standards, personal and professional, are distinctly questionable at times. However, once the clipped C17th English is mastered, the engaging details of his everyday life from servant problems to office politics draw you in and the diary is a recurrent favourite for my bedtime reading (edition by Robert Latham, from which all facts and quotes are taken).

For the first few years of the diary, a major concern for Sam (as I've come to regard him) is increasing his net worth. Near the beginning of the diary, he estimates this at £40 (very, very roughly £4,000 on an RPI basis, but much more on an earnings basis). Subsistence wages at this time were about £10 per annum for labourers and he himself is earning about £50 p.a. as a minor government official working in the Exchequer Office for the notoriously avaricious George Downing (after whom Downing Street is named). Details are not entirely clear, but out of this income he and his wife rent a small house or part of a house in Westminster for around £20 p.a. and employ a live-in maidservant for £3 p.a. for help with cleaning, cooking and washing. Food and everyday items are priced in shillings and pence, of course. He finds early on that he can't pay the rent and has to borrow from his employer and then has to borrow from a distant relative to pay back his employer, an experience which galvanises him into getting better control of his own finances.

Soon he is recommended by his successful elder cousin and sometime employer, Edward (later, Lord) Montagu, for a new position, that of Clerk to the Navy Board, a government office whose remit was to provision Royal Navy ships and dockyards with all supplies except armaments. This carried a salary of £350 per annum, but he had to pay £100 p.a. to persuade a rival to drop his claim to the post (apparently, competition for government jobs was often resolved this way). With such an increase in salary and free accommodation in the City to boot, the financial outlook seemed assured. All the more so because, as his cousin told him, "it was not the salary of any place that did make a man rich, but the opportunites of getting money while he is in the place".

This remark points to the fact that there was an informal system of fees, commissions and outright bribes that had semi-official status within government. Freelancing was expected. It was regarded as incentivising for staff and, in the short term at least, helped to keep taxation down. From time to time in the diary, Sam recognises a certain moral relativism when accepting, often substantial, gifts from contractors, but justifies it on the grounds of his superior administrative abilities when compared with his lazy and scheming colleagues (an early example of the "because I'm worth it" syndrome). Historians generally agree with that self-assessment, though.

With money now pouring in, he starts spending on clothes, entertainment and expensive household goods, the whole consumerism trip (after the Protectorate, many were similarly sucked in). Gradually, the number of servants increases to six. He soon realises, however, that he is not accumulating cash as he should and yet is seemingly powerless to do much about it. In 1663 he spends £690 but earns only £444. However, like many a modern PF blogger, after numerous private struggles, he gets a grip on things and makes various rules for himself: only one theatre trip per week, no alcohol, etc., etc. Over the next few years his net worth rises substantially, but intermittently. He becomes a yo-yo spender and saver, knowing how to be frugal, but having frequent relapses. By the end of 1666 he is worth £6200, but complains that he has only managed to "earn" £2986 that year as opposed to £3560 the year before. Also, he is horrified to discover that he has spent a total £1154 over the year, nearly a hundred pounds a month, and can't really recall on what. The money just went. It's all so familiar. Many of today's PF bloggers would recognise his struggles with financial temptation.

Asset allocation was a problem too. He does not trust banks much and finds their service poor (fancy that! -Ed). He uses them, of course, but is unwilling to keep large sums on interest-bearing deposit (typically around 5% at that time), nor does he take advantage of corporate bonds from the East India Company, one of the safest of contemporary investments. Nor again is he keen to lend to the government, his employer, although on one occasion he lends £300 after being pressured to do so by his peers. He's pretty familiar, after all, with the state of government finances: the problems of getting and channelling taxation money towards paying ships' crews, for example, is a constant complaint in the diary. Whilst generally in favour of the Restoration of the Monarchy for the sake of political stability, he always remained personally an admirer of Cromwell, "Oliver" as he calls him. He was a fellow Fensman and kept a much tighter grip on revenue and expenditure in comparison with the feckless Charles II.

This, remember, was the time of the Great Plague, the Great Fire and the Anglo-Dutch Wars. Events, for Sam, were not conducive to a feeling of trust in institutions and at times he has a bit of a tin hat mentality. At one point, he owns £2800 in gold coins, the age-old store of value, but knowing how to keep them safely is a source of much anxiety and, for the modern reader, comedy, as they are at various times buried in the garden or transported to trusted relatives. In fact, he was very conservative in his views on money compared with many contemporaries, who were often more willing to take advantage of the new financial instruments then appearing. He had a point, though.

There were several banks at the time, amongst them Backwell's, Colvill's and Vyner's, although they were all originally goldsmiths. These firms dealt in millions and handled government as well as private money. In 1665, Backwell (great name - Ed) himself was abroad on a secret government mission to arrange finance for anti-Dutch/pro-English forces in Flanders, but he was also in commercial trouble at home and investors were nervous at his unexplained absence as customers started to withdraw deposits. A senior colleague confides to Sam that "the King and Kingdom must as good as fall with that man at this time". In the event, the Exchequer rescued Backwell's business by a number of discreet bailouts. Yup, the bank was deemed too big to fail. Then, in 1667, when invasion loomed, there was a short lived run on all the banks and only a few years later in 1672, there was a general banking crisis when the government itself defaulted on debt repayments. Sound familiar?

Part of the problem was that there was no clear distinction between the monarch's revenue and the government's. From various diary entries, it is clear that this was clearly recognised as a major problem in the government circles that Sam moved in. Taxes which should have gone towards the navy payroll, for example, could be (and often were) diverted towards all sorts of freeloaders whom Charles II happened to find interesting. It was not until the 1690s that the monarch was given a defined and limited salary, the Civil List, Treasury funds isolated from the monarchy and the Bank of England established.

Sam was a shrewd operator, but not ruthless, and there are examples of him putting "the King's business" before personal profit by, for example, insisting on quality timber from suppliers. On one occasion, he secured a £5,000 saving on a food supply contract and managed to pocket £300 for himself. Yes, he always had an eye to the main chance. At the start of hostilities with the Netherlands, he profited from contractors bribing their way into contracts for new ships, but when government finances were subsequently revealed to be in a parlous state, many were keen to bribe their way out and to offload the promissory notes that they held. Sam obliged by buying them at a hefty discount and selling them on to bankers at a sizeable markup. This two-way "commission" was a source of great personal satisfaction. All this was perfectly legal, though he did run close to the wind at times in some areas of his official duties, such as distributing the proceeds of captured enemy ships.

Another interesting feature of his life is the whole issue of work-life balance. For someone reading the diary fifty years ago, when 9-5 reigned supreme for most of the middle classes, Sam's fluid attitude to work must have seemed a bit strange, but these days, I suspect, less so. The photo below, which I took a while ago, shows Seething Lane in the City where he lived:

The Edwardian office block on the extreme right occupies the site of the Navy Office, a huge rambling house which was taken over by the Navy Board in 1657 and converted into offices and accommodation for staff for the sum of £950. On the left, the modern, rather drab memorial gardens cover approximately the original private garden which Sam and his colleagues used. The church opposite, St. Olave's, with its gateway surmounted by skulls, was where he ogled women, listened to sermons and dozed off. The churchyard is raised about two feet above the street level. This was caused by the number of victims hastily buried during the 1665 plague, a discovery that shocked him when he returned home from Greenwich at the beginning of 1666. Today, it is a quiet leafy spot in which to have a picnic lunch:

The fact that Sam lived over the shop probably influenced his working style to some extent. Very often he starts early, say six or seven o'clock, returns home or to an inn for lunch, is out gallivanting in the afternoon and does another turn in the office in the evening before going out again until the small hours. On some days he travels to dockyards such as those in Deptford or Woolwich to inspect stores or meet contractors, whilst on other days he is networking with senior officials at Whitehall and Westminster. On some days he just goes out enjoying himself. In those times there was no concept of a weekend and he works most Saturdays and some Sundays. It all seems pretty free and easy, and you get the feeling that there is not always a great distinction to be drawn between the personal and the professional. With his great interest in scientific instruments and technology he would have loved a Blackberry or iPhone for keeping tabs on things.

Pressures to spend were always high and he was usually generous to friends and family as well, although often not to Elizabeth, his long suffering wife. She had developed lifestyle expectations as her husband's career progressed, but sometimes she bore the brunt of his periodic budgetary crackdowns when her clothing allowance was curtailed. In 1668, she discovered his affair with Deb Willet, her personal maid (salary £8 p.a.). She may have had suspicions of his womanising before and she was possibly not completely without fault on that score herself, but she found the two of them together (". . . with my main [hand] in her . . . I was at a wonderful loss upon it, and the girl also"). Despite many other casual girlfriends, Deb was probably the only other woman apart from his wife that he cared for. She, of course, was dismissed, but Elizabeth, who came from a poor Huguenot family and had no money of her own, had no option but to carry on with married life however bitter she may have felt. From then on, though, she was able to extract larger amounts of cash from her husband for her personal needs and wants. Top of the agenda was a coach and horses, a huge ongoing expense and a symbol of having "arrived" (although, he justifies it by savings on daily hire). He admits to himself on more than one occasion that, while life has a habit of throwing things at you, sometimes they are your own fault too.

As his professional and personal affairs became more complex he lost track of his finances to some extent and ceased his regular accounting which is such a feature of the early diary. By the age of 35, he had become a bit of a workaholic at times, but knew now that he was secure, financially. Later on in his life he had some professional setbacks and was inevitably caught up in the political instabilities of the times, but his excellent networking skills ensured that he always had further opportunities to exploit. It is reckoned that when the diary closed in 1669 he was worth about £10,000, a considerable sum when compared to the fortunes of the labouring classes. It was, however, quite modest when compared with many of his contemporaries who, like him, were also on the make and on the take, but who were generally far more rapacious. His erstwhile boss, by now Sir George Downing MP, was worth millions by this time, i.e., hundreds of millions in today's money. He could have bought a lot of duck houses.

Samuel Pepys went on in later life to become Secretary of Admiralty Affairs (salary £2,000), one of the most prestigious jobs available in government service. He was always very comfortably off thereafter, but he never owned a house or had children (Elizabeth died suddenly in 1670). He never kept a personal diary again since he was worried (unnecessarily, as it happened) about his eyesight, so we know less about him in later life. Although self-serving in many ways, he had a commitment to public service and officiated as President of the Royal Society in 1687 when Newton's Principia was published, which is why his name appears on the title page. However, although he was a good Latinist, he would not have understood much of it. Ironically, given his care to obtain financial reward for his professional labours, he himself had difficulties obtaining his official pay at times (not that he really needed it) and he died at the age of 70 with the government owing him £28,000 in backpay.