What It Means To Pay Yourself First
This article is posted under Mindsetting, Money Saving Tips, Personal Finance.
Paying yourself first is the simplest way to save money.
I’ve learned about this concept a long time ago but never really did it until a couple of years back.
It’s actually very simple but quite often difficult to apply. If you like reading books on personal finance, I’m sure you’ve encountered this advise and I surely hope that you’re able to follow it. If this idea is new to you, then read on and see how you could start investing in yourself.
How To Start Paying Yourself First
Be frugal for a period of one pay day. This does not mean that you will eat instant noodles everyday or walk 20 kilometers just to save on bus fares. Live comfortably without doing any impulsive buying and committing unnecessary expenses (You don’t need to drink at Starbucks every single day).
After which, see how much of your salary is left at the end of the period. From there, determine what percentage of your earnings do you want to save. I recommend ten percent (10%). This means that every pay day, you will set aside that much first. No questions, no buts, no exceptions. If that seems a lot, then try a smaller figure but make changes in your spending habits so you could increase the rate to at least 10%.
Then, open a savings account, preferably one that has no ATM card, so that it won’t be convenient for you to withdraw cash anytime. You will deposit the payments to yourself there. Let me emphasize that this is about paying yourself first, so once you get your salary, your next step is to go to the bank and deposit the allocated percentage. What’s left of your salary is for your other bills and daily living expenses. Feel free to spend all that’s left until the next salary period (Yay!).
What do you do with the money that you saved?
You can only spend the money in your savings account in two ways. First is for matters of life and death (What use is your money if you’re dead, right?) and second is for investing (Spend it on something that will earn you money). It may also be wise to hold on to the money in that account for a few months and see it grow. This will bring you a sense of accomplishment and satisfaction. After that, start looking for opportunities so that you can make that money work for you.
I’d like to end with a quote from Chris Johnson, author of the website, Wise Bread. He says in a similar article: “Be proud and protective of your earnings. This money is your chance at great wealth.”
Yes indeed it is! Good luck.
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Photo courtesy of Wise Bread
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