If you are like my self, you get paid bi-weekly. And out of every paycheck, you have a set of bills to pay. What are some of those bills? For most it’s rent or mortgage? Maybe your car payment? or perhaps it’s your cable or cell phone bill? Whichever kind of bill it is, it has to get paid and will get paid sooner, rather than later or else the creditor will come calling. Fair enough, but who’s going to pay you? If you don’t pay your self FIRST, no one else will and certainly those creditors wont, because all they care is about their cut out of your hard earned paycheck.
The only way to get ahead and have some money to fall back on during those rainy days is to pay your self first. If you’ve read any personal finance book, one of the first talked bout principles is paying your self first. Even if you are in debt to your eyeballs, you must pay your self first.
Importance of paying your self first
Even when times are tough and believe me I know a thing or two about tough times, you must pay your self first. Work off your budget and decide how much you can allocate to your self. Something is better than nothing.
Even if you start off with $50 per month, that’s $600 you will have at the end of the year in your bank account.
Some will argue, that its better to pay off your debt before saving and as much as I am for eliminating debt, I’m also equally for saving. Paying your self first. You are your only hope, without you saving for your self and your future, no one else will. So why pay your self first? Because if you don’t, no one else will.
Your future is at stake
Saving for the future is utmost important in the present. We all have different goals, bills and life hardships to deal with, but we must incorporate saving now for the future.
Find your comfort zone and what works for you. Start small and gradually increase over time.
Find ways to cut back in certain aspects of your life in order to fund your savings in the present. Even if that means cutting out cable, switching to a cheaper cellphone plan, not eating out and even moving to a smaller home to decrease your rent/mortgage.
Boosting your savings
One of the easiest ways to boost your savings is taking on a second income stream. There are multiple part-time jobs out there waiting to be filled. In fact, there seem to be more part-time jobs available than full-time jobs.
I work three jobs in total. My primary source of income (my 9-5) is in marketing, I also have a small side business in commercial cleaning and also write/freelance write as my third income stream. Aside my full-time job, I don’t earn big bucks with my two part time gigs, but it gives me a sense of fulfillment and I’m fortunate enough to be able to earn extra income. My extra income per month basis is roughly 40% of my full-time income.
Ways to pay your self first
There are multiple ways to pay your self first and you should find a way that works best for you. Here are a few options:
Automatic Withdrawal – Talk to your bank or even better walk into a new bank and setup an automatic withdrawal. I bank with RBC and setup an automatic withdrawal through ING Direct. They take out $100 bi-weekly or $200 per month. I arranged it, so that they take it out on the day that my bi-weekly check deposits happen in RBC. I don’t have to worry about it and the beauty of it being in another bank institution, is that the money is not easily accessible, because I do all my banking via RBC.
Paycheck Deductions – Talk your payroll department and have your employer deduct a certain percentage of your every check and depost it into a separate account of your choice. All you have to do is open up another bank account and give them a void check and amount you want withdrawn per paycheck. They will take care of the rest.
Cash Transfers – If you’re really frugal with your money and good at managing your spending, you may want to do the legwork your self by taking out the money your self and saving it in cash or in another bank account. Personally I don’t support this idea, because it involves too much legwork, when it can be done automatically for you. That being said, if it’s going to get you to save money, than do what you gotta do.
I set up a payroll deduction for maxing out my 403B, IRA and Roth IRA and we live on what is left. It is very automatic and I do not even think about it. It is easier for us since I have no debt except for a small mortgage.
Like you said it’s automatic and that’s the beauty of it. When do you think you’ll have your mortgage paid off by? BTW keep up the good work!!
I actually hate the idea of automatic control savings deposits, because I like to control how much I put in every month. Like, say I usually save X off my paycheque, but what if one month I earn some extra cash, and want to make a larger deposit. Or I have a planned expense coming up (like, say, my cat’s annual check up), so instead of drawing money out of my savings to pay for it, I just put less in. I just prefer it that way. I know I’m in the minority.
I get paid twice monthly. Both my rent and my credit card bill are due on the same day, so I usually “pay myself” on the 15th of every month, since less of the money is accounted for. I probably save between 30 and 35 percent of my net income every month. (I leave a bit of “just in case” money, which is sometimes spent and sometimes saved, so that’s where the variance comes in.)
First off, I like that you save 30-35 percent. Which is really good, as most don’t come close to that. We all have our ways like I mentioned, yours works best for you, for me I like it automated (all the work being done for me) and if I have extra cash, I will take it and deposit it manually or transfer it manually.
yes it’s a good article
Thanks Rosy!
I pay myself first but I control it by setting up the deduction.. I don’t make it COMPLETELY automatic, but I put in a set amount each pay check (usually the same amount) for a few months. It’s nice to have a bit of control still.