When it comes to your finances, one of the most important things to remember is to “pay yourself first.” It means setting aside money for yourself before you pay any bills or expenses. It may seem difficult to do, but it’s a very smart habit to get into.
People often find it difficult to save money, but if you don’t pay yourself first, you’ll never be able to save anything. There are a few reasons why paying yourself first is so important:
- Establishes a savings habit: Once you get into the habit of paying yourself first, it will be easier to save money in the future. It shows that you value your finances and are willing to make sacrifices to improve them.
- Helps you stay disciplined with your spending: If you know that you have to set aside money for yourself each month, you’ll be less likely to overspend. It gives you a sense of control over your finances and helps you stay on track.
- Prepares you for retirement: If you start saving for retirement early on, you’ll be in a much better position when it comes time to retire. It’s never too late to start saving, but the sooner you start, the better.
Much like anything else, there are a few different ways to pay yourself first. Here are a few of the most common methods:
- Automatic deductions from your paycheck: This is probably the easiest way to pay yourself first. Have your employer automatically deduct a certain amount of money from each paycheck and put it into a savings or retirement account. Moreover, you’ll never even miss the money since you will take it out before you have a chance to spend it.
- Transferring money to a savings or investment account: Another easy way to pay yourself first is to transfer money to a savings or investment account each month. You can do this manually or through an automatic transfer. It’s a great way to save money for retirement or other long-term goals.
- Creating a budget: If you want more control over your finances, creating a budget may be the best option for you. With a budget, you can allocate a certain amount of money each month towards savings or investments. It will help you stay disciplined with your spending and make it easier to save money.
Many people struggle with what to do with the money they save each month. There are a few different options, and which one you choose will depend on your situation:
This is probably the safest option since you’ll have easy access to your money if you need it. However, most savings accounts offer relatively low-interest rates, so you won’t be able to grow your money very quickly.
If you want your money to grow over time, investing it in a retirement account like a 401k or IRA is a great option. Many retirement accounts offer tax advantages, and your money will be able to grow without being taxed. However, you won’t touch the money until you reach retirement age.
If you’re willing to take on a bit more risk, investing your money in stocks or mutual funds can be a great way to grow your savings. However, there is always the possibility of losing money if the stock market takes a downturn.
If you have entrepreneurial aspirations, starting your own business may be the best option for you. It can be a risky move, but it has the potential to pay off big time if done correctly.
Paying yourself first is one of the smartest things you can do for your finances. By setting aside money each month, you’ll be in a much better position to save for retirement or other long-term goals. Try out one of the methods listed above and see how it works for you. You may be surprised at how much easier it is to save money when you pay yourself first.
To learn more about money management and principles, signup for Wealtheo+ today. We have a variety of articles and resources that can help you get your finances in order.