When you ask people if the salary or wages they earn at the end of the month or work done is 100% theirs, their answer will be yes. But you are wrong if you don’t pay yourself first. Let me break it down and tell you why the money you earn isn’t yours until you start paying yourself first.
When you receive your salary at the end of the month or your wages at the end of the service you rendered, the next thing that comes to your mind is paying your bills or satisfying your wants. You will settle the electricity bill, water bill, school fees, go shopping, replenish your wardrobe, fix damaged furniture, etc.
The money you spent doing these things are not going back into your pocket, you sure know that, at the point of exchange it belongs to someone else. The rest will surely be spent on transport and feeding until nothing or little is left before the next payment is done.
Even if you save some of the money in the bank or using other savings method, you still didn’t pay yourself if at the end of the day you exhaust it. You will pay yourself first by saving nothing less than 10% of the amount you earned either on monthly, weekly or daily bases. This method may seem impossible because of the stack of bills you have to settle, it is however, the best you pay yourself first before settling every other bills. Paying yourself first is the first bill you must pay.
Here are the ways to start the process of paying yourself first
- If your employer offers a retirement plan (most companies now offer compulsory retirement plans) — enroll as soon as possible, especially if the company matches your contributions.
- Open a high interest savings account at a bank – Set up automatic transfers into this account, either directly from your paycheck or from your regular bank account. Treat these transfers like you would treat any other financial obligation. This should be your first and most important bill every month.
- Direct depositing is another way to go. For those who are self-employed, it’s hard to determine the amount to pay from month to month because the income is not fixed. There are times that they will earn much in a month and other times that they will earn very little. It should be at the back of your mind that no matter the amount earned, you must pay yourself. So, such person should have a bank account where he deposits his payment.
If 10% will be too much for you as a starter, you may start with an amount that is convenient for you. What you should not fail to are – never fail to save and never forget to increase the % as time goes on. You may save more than 10% and if at the end of the month you have something left you may save that as well. It will serve as a booster to your savings.
Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.
Credit: Darlinton Omeh