Paying Yourself First a Key to Success
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Pay Yourself First

Paying Yourself First a Key to Success

Mar 20, 2018, 08:50 AM by Krista Olson
By taking just a few simple steps…your family can achieve success.
Reaching financial freedom doesn’t require a great deal of expertise. And, by taking just a few simple steps…your family can achieve success.

Paying yourself first is one of these steps. The theory is most people learn to live on the income they earn. So if you pay yourself first, you won’t miss the money set aside for future goals.

Let’s take a look at how it works and steps you can take to get started. 

Most people find themselves stuck in a cycle of Earn-Spend-Save. This is when you save the money left over at the end of each month. The challenge this presents is unless you follow a strict budget…there isn’t anything to save at the end of the month. Leaving you thinking – why don’t I have any money in savings?

I recommend you change your spending cycle to Earn-Save-Spend. This means you set aside money for saving immediately and work your budget to fit the remaining amount. By paying yourself first, you’ll insure money gets to your savings account and that is the first step to success. 

The best and easiest way to accomplish this for retirement savings is enrolling in an employer 401k plan. Another way to pay yourself first is setting up automatic transfers from your direct deposit and put it aside in a separate account for future spending, retirement, or a rainy day.  If you are saving for multiple goals, set up multiple transfers and you can name each one accordingly. When the account is labeled, it is easier to stick to your savings plan because you know exactly what you are pulling the money from. 

This simple step, of paying yourself first, will limit the amount of financing you need to purchase a car, help you save for a house down payment. Over time, you will save interest on loans and lot of money in the long run. 

This may not work for everyone. Especially if you have high interest debts. In that situation, pay those down as fast as you can and then start paying yourself first and get on the road to financial freedom! Good luck!