Pay Yourself First: Someone’s Gonna Get Rich – It Might As Well Be You Instead Of Your Creditors
George Boelcke FCI
July 26, 2007
So how are your savings coming along? Our savings rate is now down to about minus one percent. That means on average, we’re cashing more and more of our savings while putting less and less back in. We need the money today to keep our financial heads above water – and never mind tomorrow.
Now take away the top 20 percent or so of people who maximize their IRAs or 401(k) plans and have their investments in line. That makes the average savings rate for the rest of us more like four, five or six percent in the hole each year. Yet 20 years ago, we were amongst the biggest savers in the world. What happened?
Well, arguably we’ve become more and more of a consumer society in a world where our income hasn’t come close to keeping up with the cost and variety of things we just gotta have right now. That’s why one of the most important steps to any financial game plan is to pay yourself first. It’s actually a slogan of Primerica Financial Services, who are featured in the It’s Your Money book, but for all of us, nothing could be more important to our financial freedom and health.
It simply means that your savings come first, no matter what. After all, nobody else cares about your retirement planning, college fund or emergency savings – so it’s up to you. The easiest way to do that is to have a fixed amount taken right off your paycheck or out of your bank account on the first of the month. Because what you don’t see and don’t have - you can’t spend.
Remember your last pay increase? Maybe it was a hundred dollars – but by the time tax was taken off, it hardly made a dent and you quickly adjusted to spending this new amount. So it might be a bit of an adjustment to have some money taken right off your check, but after a month or so – you likely won’t miss it.
As of right now, how did it become OK that everyone else gets rich from you except yourself? Make a commitment to pay yourself first no matter what – starting this month. Then attack one of your bills and when that’s paid off, take the money you were paying to that creditor and change it over to paying yourself too. You’d be amazed at how quickly it’ll add up. Just two hundred dollars a month that you used to pay to others will turn into more than $35,000 in the next ten years just by paying yourself. After all, you can either pay interest out to others – or collect it for yourself.
Are you worth it? Will you do it? Are your dreams, goals, financial freedom and emergency savings just as important as paying all those other creditors each year? Only you can decide.
Now take away the top 20 percent or so of people who maximize their IRAs or 401(k) plans and have their investments in line. That makes the average savings rate for the rest of us more like four, five or six percent in the hole each year. Yet 20 years ago, we were amongst the biggest savers in the world. What happened?
Well, arguably we’ve become more and more of a consumer society in a world where our income hasn’t come close to keeping up with the cost and variety of things we just gotta have right now. That’s why one of the most important steps to any financial game plan is to pay yourself first. It’s actually a slogan of Primerica Financial Services, who are featured in the It’s Your Money book, but for all of us, nothing could be more important to our financial freedom and health.
It simply means that your savings come first, no matter what. After all, nobody else cares about your retirement planning, college fund or emergency savings – so it’s up to you. The easiest way to do that is to have a fixed amount taken right off your paycheck or out of your bank account on the first of the month. Because what you don’t see and don’t have - you can’t spend.
Remember your last pay increase? Maybe it was a hundred dollars – but by the time tax was taken off, it hardly made a dent and you quickly adjusted to spending this new amount. So it might be a bit of an adjustment to have some money taken right off your check, but after a month or so – you likely won’t miss it.
As of right now, how did it become OK that everyone else gets rich from you except yourself? Make a commitment to pay yourself first no matter what – starting this month. Then attack one of your bills and when that’s paid off, take the money you were paying to that creditor and change it over to paying yourself too. You’d be amazed at how quickly it’ll add up. Just two hundred dollars a month that you used to pay to others will turn into more than $35,000 in the next ten years just by paying yourself. After all, you can either pay interest out to others – or collect it for yourself.
Are you worth it? Will you do it? Are your dreams, goals, financial freedom and emergency savings just as important as paying all those other creditors each year? Only you can decide.
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