Pay yourself first!! The first bill you pay each month should be to yourself.
Before you pay your bills, buy groceries, or do anything else with money you receive, set aside a portion of your income for you and your future.
Put the money into a money market savings account for your security. You need 3-6 months (or more) of accessible cash in case of emergencies. Once you have that in place, secure your future with insurance and investing in fixed income investments like government bonds.
You don’t want to depend solely on the government for your retirement – trust me, if it’s going to be available to you by the time you retire, it will not be enough; therefore contribute to your 401(k) or a Roth IRA. If your company matches funds – all the more reason because it will build up your account faster. When it comes to retirement – no amount is going to be too much!
What would you like to do? Would you like to own a home? Start a family? Travel? Whatever it is, set aside a portion towards your dream.
I believe in order to receive, you must first give; therefore, set aside a portion to tithe or give to your favorite charity. (BONUS: This amount is tax deductible if given to a qualified non-profit organization.)
In other words, the goal of paying yourself first is to help make sure your future self’s key financial goals are covered.
I don’t have to share with you what happens if you try to do this AFTER paying your other bills – we all know this cycle too well. If you want to create a secure financial future (and live with less stress) just do it.
This means you need to get into the mind-set of paying yourself first and that can be a challenge for even the most money-savvy among us. To help, have the money taken from your account BEFORE you even see it. You can set up direct-deposit contributions to designated accounts (money-market savings, retirement, etc.) before that money hits your checking account.
The choice is yours. YOU DECIDE how much to contribute each month. My recommendation is to set aside a percentage for each category.
For Example: A starting goal could be to pay yourself 10% of any income you receive. From there, you can allocate 4% to one category, 2% to another, 3% to yet another and 1% to the final – you get the idea?
If you do this, don’t be surprised if over time your income increases. Why? Because you will have started to handle money wisely and the universe will reward you by sending more your way. Once this happens make sure to increase the percentage amount.
Bottom Line: Pay Yourself First! This money habit can help you create wealth.