To pay yourself first means simply this: Before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to save. The first bill you pay each month should be to yourself. This habit, developed early, can help a person build tremendous wealth.
Some financial 'GURU' would advice you to PAY YOURSELF 1% to 10% from your total earning, but really it is up to you. What's important is that when it comes to money, it is important to appreciate yourself first.
Normally on pay day we would be busy paying bills, debts or shopping. Pay youself as a way to say thank you and acknowledge yourself for all the hard work you have done. This is a good way to practice appreciating youself.
This 'PAY YOURSELF' money is different from savings, emergency fund, investment or any other 'SAFE' you might have. This is entirely for you! so, whenever you decide to spend it, spend it for you : buy toys (Cars, Games, etc.), go on holiday, shopping etc FOR YOU.
Experts in financial education explains three main reasons why you should pay yourself first:
- When you pay yourself first, you’re mentally establishing saving as a priority. You’re telling yourself that you are more important than the electric company or the landlord. Building savings is a powerful motivator — it’s empowering.
- Paying yourself first encourages sound financial habits. Most people spend their money in the following order: bills, fun, saving. Unsurprisingly, there’s usually little left over to put in the bank. But if you bump saving to the front — saving, bills, fun — you’re able to set the money aside before you rationalize reasons to spend it.
- By paying yourself first, you’re building a cash buffer with real-world applications. Regular steady contributions are an excellent way to build a nest egg. You can use the money to deal with emergencies. You can use it to purchase a house. You can use it to save for retirement. Paying yourself first gives you freedom — it opens a world of opportunity.
AUTOMATIC MILLIONAIRE by David Bach also elaborate about this financial rule and how it can make you a millionaire.
I would highly recommend you to read these books or if your one of those who are currently financially short, check out these two websites for free financial advices and tips.millionringgithomepage.com
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4 comments:
one thing i would like to add.You have to start planning for your retirement once you start working.If you had envision yourself living in a certain lifestyle after retirement then you should start planning now to achieve that.We tend to start planning for our retirement at the later stage of our working life which is too late.I do agree with the concept of paying to yourself , but getting yourself into some sort of money market investment is also good.Invest for the long term and not short term.Have another 25 years old before retirement ,still a long way to go .I dreamt of living a good life after retirement and had started planning for it.
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absolutely true...it is more rewarding to start early...I'm only 26 years old and I do realize that I have to start planning now...before life gets more complicated....
However the common mistakes people in their twenties make is that they don't plan...and by the time their in the thirties, they'll find themselves in a big financial mess.
I'm still learning and still struggling to keep my integrity IN when it comes to money.
Thanks for the share.
still young. save RM500 per month, u'll be a millionaire by the time u retire. pay yourself first will only get u there. good luck!
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