Pay Yourself First And Watch Your Finances Grow!
We all know the drill. It’s payday. Our paycheck gets deposited, we go home and pay bills. Very soon after this bill paying experience we look back at our bank account and wonder, “Where did my paycheck go?” It’s almost all gone.
This scenario is repeated all over the United States and Canada and the world. If this is a routine that is familiar to you, it is possible to make changes so that all of your paycheck doesn’t go out as fast as it comes in.
The fastest way to make a real change in your nest egg is to pay yourself first! If this sounds impossible to you read on. Here is a good discussion to help you understand the reason paying yourself first is so important and how it can pay you for years to come!
Want to spend ten minutes doing one thing for your finances that will have an absolutely MASSIVE impact on your ability to spend less, save more, and reach your goals faster?
If you answered yes, then it’s time to pay yourself first.
The concept is simple: Every payday, the very first thing you do is set aside a percentage of your income in a savings account. You do this before you pay the rent, before you pay your other bills, and before you head to happy hour. You “pay yourself first”.
The strategy is simple, sure. But it’s powerful because:
It puts saving first
Something amazing happens when you tell yourself you’re going to set aside money for yourself and that it’s more important than all the other things that need to be paid. Once you get used to the idea—and see your savings start to accumulate—it becomes kind of addictive. The more you save, the more you’ll want to save!
Once you set up an automatic transfer or split direct deposit in your savings account, you can stop replying on yourself to save money instead of spend it. (Just like me, you’re human, and we humans tend to be bad at stuff like that.)
– via Money Under 30
Systems and Benefits of Paying Yourself First
Here are some of the real benefits of paying yourself first as well as an explanation of one system called zero-sum budgeting. Take a look and take a leap and start paying yourself first!
…Another popular meme in the world of personal finance, “pay yourself first,” is one that took a while to grow on me. But now that it has, it’s become the cornerstone of my own personal finance philosophy. Here’s why.
Our system: zero-sum budgeting
When my husband and I started budgeting many years ago, we naturally gravitated toward zero-sum budgeting — a system that forces you to estimate your expenses, live off your last month’s income, and pay your investment accounts as if they were one of your regular bills.
I eventually found that zero-sum budgeting was the perfect compliment to our fluctuating incomes. No matter what we earned one month, we would take that amount and divvy it up to pay the next month’s bills, investments, and expenses. In a sense, this forced us not only to pay ourselves first, but also to give each dollar we earned a job. Even better, spending all of our money on paper forced us to look at our extra income each month and put it to good use…
…What I learned from paying myself first
After paying ourselves first for several years now, I have seen what a huge transformation this financial strategy can make. We used to struggle to save much of anything outside of our retirement accounts, but now we’re saving a large percentage of our income with plenty of money left over for fun and adventure.
I shudder to think where that money might have ended up if he had never started budgeting or putting our financial priorities in order. The mall, perhaps? New cars every few years? Surely excessive grocery spending and fine dining would have continued on unchecked. Who knows?
Regardless, paying ourselves first took all of the temptation away. By mindfully reducing our incomes through forced savings, we had to learn to live on what was left.
And in a way, that is probably the greatest lesson we learned during the entire process. No matter what type of lifestyle the people in our inner circles are living, we have the power to live on much less than we earn. No matter what anyone else says or does, it’s our choice. What we do — and what we don’t do — are truly the only things that matter.
– via Get Rich Slowly – Personal Finance That Makes Cents
Do you pay yourself first now? After reading today’s post are your ready to begin?