Pay yourself first- a sound principle
November 28, 2019
Sometimes in the wonderful world of finance, a simple concept seems to resonate.
Pay yourself first is a sound financial principle particularly in our age of never-ending expenses.
Consider the saving patterns of a young family. Financial challenges include mortgage payments or rent, household living expenses, the cost of an automobile, and commuting to work. Child expenses are high.
Many families run out of money before the end of the month so are forced to coast until the next payday. That is typical of many of us including young families.
Now you add the long-term financial goals of paying down debt, saving for children’s post-secondary education and your retirement. Where is the money going to come from?
For most families saving for some of the most important life events is not possible. There are too many expenses. Saving is not happening.
If that is the case perhaps it is time for a different perspective. Re-frame your financial pattern by making one simple adjustment.
Don’t save what is left over at the end of a month or pay period. Pay yourself first.
At the beginning of every month have a specific amount of money automatically taken from your bank account and direct that money to the various savings plans that are most important.
I understand that many households run out of funds by the end of the month. Just move yourself to the front of the line.
If there aren’t enough funds during the month, decide what expenses can be reduced or eliminated. Look after your long-term financial priorities.
The mechanics of setting up an automatic monthly savings program are very easy. Developing a sound financial savings habit needs to be painless, so, if cash flow is tight, consider starting with a nominal amount.
You will likely find you’re able to adjust your spending to accommodate some monthly savings. If that is the case, consider increasing the monthly automatic savings amount.
Of all your monthly expenses you are the most important. Adjust your finances.
Pay yourself first.