The concept of paying yourself first is not a new phenomenon. We all know that self-care is critical and one of the best forms of self-care is taking care of your finances.
Most people are in the habit of paying for needs, spending on wants, and then saving or investing money last. When you do this, not a lot of emphasis is placed on saving and investing. The result is that our future wealthy self suffers because we are not taking care of our future finances.
We all have goals and dreams that we want to accomplish, but many of us are unable to do so because we do not know how to prioritize our money. My mission is for everyone to be wealthy and to be wealthy you have to understand how money works and how to manage and multiply your money.
What does it mean by “paying yourself first”? Essentially, you have to make it a priority to put aside money into a savings or investing account as soon as you get paid before spending that money on anything else. This account should be separate from the account you use to pay your bills and other living expenses. By paying yourself first, you are prioritizing saving or investing for your future self before you spend money.
There are several ways in which paying yourself can be achieved. The main concept is for you to pay yourself like you pay a bill- treat your savings and investments as if they were a bill. Just like you can’t miss a light bill or your electricity will be disconnected, you can’t miss paying yourself or you will be struggling with money forever.
One of the easiest ways to pay yourself first is through your employer. This can be obtained by setting up a standing order of a certain percentage from your salary to more than one account; or by contributing a percentage of your salary to a retirement plan. This is one of the few activities with your money that I would say set it and forget it is an ideal move.
Paying yourself first can be successful by following these suggested tips:
1) Automate your savings- this reduces the temptation to spend the money you have set aside for saving. This is money set aside for emergencies and short-term needs mainly.
2) Automate your investing- saving money is no longer enough to build wealth, therefore, assigning money for investing is important. For long-term goals such as retirement, investing is a better option for building wealth over time. Investing is how you build lasting wealth.
3) Give your account’s name- doing so will help minimize temptation or dipping into the accounts. Having a “vacation” account or “splurge” account will help you to know how much money you have available to enjoy the luxuries of life and can also motivate you to keep putting aside money in these accounts.
4) Use refunds or bonuses to help enhance your savings and investment accounts. Any and every excess cash you receive should be put to work. Idle money is the worst type of money to have.
I want you to know that money is possible. Follow these steps to paying yourself first and you will be well on your way to a brighter and richer financial future.