Welcome to Day 7 of the Master Your Money course!
How much money are you currently saving each month? What if I told you that you may be able to save even more and all you have to do is pay yourself first?
Seems simple enough, yet not many do this. Many families just save whatever amount they have left over at the end of each month.
Yes, many bills and expenses are necessary each month, but there may also be a lot of unnecessary spending going on in your life as well.
Spending money isn’t a bad thing, but if you aren’t saving for your future as much as you should then you need to reevaluate what you are doing.
Paying yourself first before you pay for your monthly expenses may be a scary thought. No one wants to over withdraw from their checking account or be unable to pay their monthly bills.
However, your future is just as important too, so it is much better to think about saving money as aneed as well instead of something that can be pushed aside.
Sadly, there are many out there who do not save enough money when preparing for retirement. According to Zacks Investment Research, 72% do not save enough for retirement each month.
Also, according to a different survey done by Bankrate.com, 36% of people in the United States have absolutely NOTHING saved for retirement.
These numbers are very alarming.
I believe that if more paid themselves first, that retirement and other financial goals wouldn’t seem so impossible.
Below are some of the things you may want to think about when it comes to paying yourself first.
What exactly does it mean to pay yourself first?
In case you read all of the above and you still are not sure what “pay yourself first” means, some background information may be needed.
Paying yourself first is when you put money into savings as soon as you receive your paycheck. Or, I know some who “pay themselves first” by putting extra money towards their debt as the first thing they do each month. There is no right or wrong answer – basically just pay off or save towards whatever you think you should be doing and do it FIRST.
This is the first thing you do with each paycheck – you don’t even pay your other bills first. Try to think of savings (or debt) as the very first bill you have to pay each month.
It may allow you to save more money and cut back on unneeded spending.
As I said at the beginning, you may be able to save more money if you just pay yourself first. Learning to budget with just the amount of money that you have left over after you pay yourself first each month can help you save more money. Yes, it may be difficult at first but you will get used to living on less money.
You may have to do some cutbacks with your budget or find ways to make more money, but by only having a limited amount of money to spend each month, you will find that you will watch your spending more closely.
This may allow you to really see what is a need and what is just a want.
Paying yourself first can help you prepare for the future.
Your future is important. By waiting to save until the end of the month and just saving whatever you have leftover, you are not prioritizing what is important in life – your future.
By paying yourself first, you will think about your future more and you will make it a priority.
It doesn’t have to be difficult to pay yourself first.
Once you get into the routine of it, it can be quite easy to pay yourself first.
Here are my tips so that you can pay yourself first:
Take a look at how much you are currently saving and spending each month. Start tracking your spending a little more closely and see how much of that is actually unneeded. Calculate how much money you should be saving each month and set that aside at the beginning of each month.
Make it automatic. To make it easier and to simplify your finances, you may want to set aside a specific savings amount each month automatically.
If you feel uncomfortable with paying yourself first, then you may want to find ways to cut your budget back or make more money.
Well, that’s it for today. Tomorrow you will receive the next lesson that will teach you how to start investing. It’s simple, I promise!
Michelle Schroeder-Gardner MakingSenseofCents.com