If you aren’t going to pay yourself first, who will?
The objective of this article is very simple – to teach you to Pay Yourself First. Although a very common advice in the financial planning world, not many people practice this simple but powerful wealth-building technique. If you find yourself wondering what you spent that paycheck on at the end of every month, here are 3 extremely simple steps to start NOW:
1) Decide on an amount
Many financial planners suggest to save 10% of your pay, if you can’t put that much away, then you should start with as much as possible and gradually increasing that to at least 10% or more. At the meantime, also try tracking your every expense for 3 months and you’ll be amazed at what unnecessary expenditure you have. In no time, you’ll be able to pay yourself more than 10% or more.
2) Have it on auto-pilot
Have your money transferred to another account automatically each month. If you think you will be tempted to use those funds you save up, make that account less accessible by cutting up the ATM or debit card associated to it.
3) Build wealth on the money you save up
Once you have developed your investment plan, you can use these funds that you saved up to build your wealth. Imagine if you save $150 per month invested at a rate of 10% annual return =
1 year = $1,885
2 years = $3,967
5 years =$11,616
10 years = $30,727
15 years = $62,171
30 years = $339,073
40 years = $948,611!!!!
What are you waiting for? Give yourself a raise and pay yourself first!
July 23rd, 2006 at 2:50 pm
Hi,
An interesting article. I’ve been doing this myself for a little over 12 months and I’ve found it an invaluable technique to wealth accumulation.
I believe the concept of paying yourself first was originally published by George S. Clason in his book The Richest Man in Babylon over 80 years ago. My own website is dedicated to Clason’s teachings.
I live in the UK and it is difficult to find fairly safe investments that would return 10%. How easy is it where you’re located?
Arkad
July 25th, 2006 at 9:26 am
Hi Arkad, welcome to my humble site. I live in Malaysia… it’s not easy to find 10% returns here as well, but I’ve come across investments that produces guaranteed 10% every year. The only catch is that the money cannot be withdrawn for a year. That investment I came across is offshore investment and I weren’t familiar with them that time so it sounded fishy to me that time. However, I found out later on that 10% return is quite common in some countries.
You can try investing offshore, my friend from Thailand invested in a swiss money market fund which produces 10% return every year. The homepage is http://www.zurichintlife.com. He has invested in this funds for about 3 or 4 years so I’m sure it’s reliable.
All the best