Posts Tagged ‘Paying Yourself First’
Pay Yourself First
You Are Your First Priority
When I first began saving money, I saved passively. I would put money into my savings account after all of my bills were paid. The money at the end is what I would keep. I may have gone out and watched a movie or went bar hopping with friends, in lieu of paying myself. I never had a savings plan, I just saved the leftovers from these activities. Once my next paycheck was upon me, the remainder of the previous paycheck went into savings. I was putting away money diligently every few weeks. Eventually I realized that this was an incredibly inefficient way for me to save money. By paying myself in this way, I was saying that I came last in line. I would pay my creditors first, my bills next, and after hanging out with my friends, I would pay myself.
I involve a little more mathematics to my budget now. As soon as my paycheck comes, I appropriate a large percentage of my discretionary money to my emergency savings account. This insures that I am getting the most of my money. I force myself to live more frugally, by creating barriers which prevent me from blowing my money on wants. Utilizing this new method of paying myself first, I am watching my savings grow at an incredible rate. The trick is to prevent yourself access to this money, by moving it into a savings account you don’t have easy access to. This is why my online savings account through HSBC has been a great tool.
A Change In Psychology
By paying yourself first, you are declaring that you are the most important object in your financial goals. You will feel a psychological change that increases your happiness. As a result of your increased savings contributions, you will start to feel in control of your financial life. Suddenly you will start to realize you have full control of your finances, rather then them controlling you. Financial problems are one of the leading causes of depression. These people don’t need to see doctors or psychologists. Simply creating a budget and saving money can work wonders on your mood. I noticed I fall asleep easier at night. I used to have trouble getting rest knowing I was spinning my wheels by not saving.
Next Stop, Financial Independence
After you have learned how to reach your savings goal more quickly, financial independence is within reach. Even with debt, bills, and payments, you are learning the importance of saving. You will be maximizing what your money can do for you. After some snipping and cutting of some of your budget items, the amount you pay yourself will grow. Soon you will watch your money multiply under compound interest.
You could certainly appropriate this money to future goals like a house, a car, or a wedding. Instead a better idea, is to split these up into separate accounts. You can start funding these separately from your main account. This is the account that you continue to pay first above all other bills. Before you know it, money becomes a simple tool that you wield like an expert. Not much different than the way cavemen eventually learned to master fire. I am sure they were deathly afraid of it at first to.
