If you are like most other average Americans you will have a list of bills that you have to pay every month, such as rent, cable, internet, cell phone, water, electricity and much more.
If you were to list each of these monthly expenses in order of importance, which would be number one?
The answer is none, because there is one payment you need to make which is even more important than all of these and that is to yourself.
The bill of “You” should be the first payment you make before you make any of your other payments. You can pay this bill by contributing a certain amount of your paycheck into your savings account.
Why is this so important?
It is extremely important because saving your money for the future should not be optional. If you are not consistently saving at least 10% of your income, you are actually living beyond your means.
If you do not pay yourself into your savings account, you will never be able to fund large purchases in life and will have to subject yourself to debt in order to buy what you need.
If an emergency such as losing your job or injuring yourself, you will have no emergency fund to take care of you and you will again be forced into debt.
When you are old enough to retire, you will have amassed no retirement nest egg to support yourself, unless you have been paying yourself first.
Make it Foolproof and Automatic
Call your financial planner right now and ask them if they can set up an automatic direct deposit from your bank account to your savings or investment account.
Schedule it every month for the day that your paycheck comes in. If you earn $400 take home pay per week for example, 10% of this is $40, so you should set up the deposit to put $40 into your savings account every week.
Pretend that it is just another bill for a service that you have signed up for. After a while, you will adjust your spending habits and get used to not having it. Meanwhile, the money will be building up in your savings account and compounding interest.
Paying yourself first with a manageable percentage of your income is one of the easiest ways to grow your savings and prepare for the future.