Filed under: Money Matters
Sure, paying yourself first sounds logical. But stop and think whether we really do that now.
Whenever your paycheck comes in, who is the one who benefits the most?
If you currently own your own place, your “landlord” probably gets the first part of you pay. If you own a car to zip you all over the place, the bank gets the second part of your pay. If you’re Asian and you’re fillial, your “parents” probably get the third part of your pay. Then the credit card companies, the monthly grocery expenses, shopping expenses, and the list goes on…
Now ask yourself where do “YOU” come into the picture? Probably when all the paycheck is used to pay for the various expenses, and IF there is any leftovers, you will be extremely happy and if you’re sane enough, to save that portion in your bank account. If you’re insane, you’ll probably find something else to use that money on.
And you wonder why is it that every month, however much you earn, there is never enough for yourself.
Let me share what many books taught me.
The first entity to pay is always YOURSELF. Set aside ten percent (this seems to be the minimum, although of course you can slowly increase this percentage as your rational mind slowly returns) of your salary as SAVINGS. Then split this amount into half, putting one half into a form of investment (which will be shared in another article). Under no circumstances should this amount of money be touched. Unless of course someone holds a knife to your neck.
Leaving the money in your savings account not only ensures compounding interest, growing your money exponentially, it also ensures that you have a back up account in case of emergencies. Needless to say, the larger this SAVINGS account is, the more confidence and ‘power’ you have in making decisions that will affect your life. You will no longer be ‘waiting’ for your next paycheck or living paycheck to paycheck, worrying when the credit card companies call up, when the bank sends letter after letter chasing for payment. The security this simple action of paying yourself first can do for you is beyond the material.
You may ask why more people aren’t doing it if it really is such a simple action. Most excuses that I have heard are that there isn’t enough to even pay the bills, much less save! But that’s only because that person is paying everyone else first before himself. Save first, then pay. Then there will ALWAYS be money to save.
Fascinatingly, humans work much like rubber bands. If we save first and realise that there isn’t much left to spend, then we probably will be able to do without a new skirt or top for that month. We are flexible and are able to adjust and change given that our motivations are strong enough. Isn’t being financially dependent an important and urgent motivation then?
Whenever my friends ask me where I have so much money to take trips that cost in the ten thousands, when they have to budget whenever they travel, I say that I have savings. Even before I started working, I was already benefiting from this simple logic. Start small and then slowly increase your savings percentage to twenty, thirty and even forty percent. You will realise soon after that we don’t really need to spend that much. Soon, you will be proud of your savings percentage, and be financially independent because of it.
Don’t wait. Start TODAY.
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