Pay YOURSELF First: A New Concept to Younger Generations

Your biggest priority should be YOU!

When I was a kid, I was really good at saving money.  In fact, the majority of my allowance and money earned from mowing lawns went directly into my savings account.  I had no idea what I was saving for; all I knew was that I loved seeing that number on my balance receipt get larger and larger   My parents referred to this condition as an “obsession” and not only referred to me regularly as a miser, but also forced me to spend my money frivolously.  Mom and Dad, I love you guys, but there’s a reason you were constantly borrowing money from me: I paid myself first.

Although the concept of “pay yourself first” is not a new concept, it might be new to young professionals.  Quite simply, this means that when you budget your money, the first bill you pay before any other is you.  I’m, of course, referring to saving.  I don’t care if you’re depositing five bucks in your savings account at the bank or keeping your cash in a mayonnaise jar buried in the back yard.  Before you spend a single cent on anything, you should be putting money aside for either short-term or long-term savings.

The biggest reason to save money for yourself is for emergency purposes.  It should be no secret that unemployment is a rather large issue, especially in Rockford.  People are losing jobs, and unemployment isn’t enough to live on.  This is why it should be everyone’s goal to have at least three months of your net salary (after taxes) set aside just in case something unexpected happens that keeps that steady paycheck coming to you.

The next step is to save for long term (i.e. retirement).  You know how most of our grandparents just seem to have no worries when it comes to money?  It’s because they spent the majority of their lives (starting when they were young like us) prioritizing their money and choosing the future over immediate gratification.  A lot of them had no other choice but to save all they could as they lived through the Great Depression (which also explains why my grandmother always served orange juice in shot glasses and hoarded paper towels).  The point is that successful retirees are enjoying life because they planned to do so.

Let’s make it simple.  Assume you have a budget for the month, and after all of your bills are paid, you look at your check book and realize that you have $20.00 left over.  What’s the first thing that you’re going to do?  Run as fast as you can to your piggy bank?  Or do you order a pizza and maybe grab a couple drinks?  In most cases, the immediate gratification always wins over saving.  My challenge to you is to save that $20.00 as the beginning of your budget.  That way, when you break even, you won’t even miss it, and you’ll be one step closer to financial security, whether in the immediacy or years later drinking mai tai’s on your yacht.

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~ by Scott L. Clark on August 2, 2010.

6 Responses to “Pay YOURSELF First: A New Concept to Younger Generations”

  1. Great post Scott!! I stink at saving but I know it’s so important. Nice post!

    -Caitlin

  2. I agree — great post! Can I also add that direct deposit is a great way to force yourself to save? That’s my trick. If I have the money in hand, it’s difficult to muster the self-control to save it. However, with direct deposit, I’m able to have a pre-specified amount automatically deposited into my savings account each pay period, with the rest going into my checking account. It doesn’t have to be a large amount either. That 20 bucks you mentioned could be the amount you designate. I don’t miss the money that went into savings because I got used to not having it every pay period. Seeing that number continually increase has made the sacrifice worth it!

  3. I agree with Mika! It’s so nice to set up an amount that goes directly to savings each pay period and budgeting from the amount that’s left after you save. Having that safety of savings is so essential.

  4. […] Your Most Valuable Asset: Your Income A few weeks ago, I talked about Paying Yourself First by prioritizing your savings for emergencies as well as your retirement. Today I’d like to talk […]

  5. In light of today’s economic climate, saving for one’s own retirement should be a top priority for everyone. If one is deceived into thinking that when they retire there will suddenly be enough money, they are engaged in magical thinking and are in for a major disappointment. Recently I read about an interesting concept called the 10/90 principle…paying yourself first by investing in your own personal financial future. http://www.christianretirement.com While it may seem selfish to some, I feel that if I do not take care of my own needs, and yes, that means putting some of them ahead of those of my kids, I have not only failed myself, I ultimately fail them as well.

  6. […] of income if we are unable (or unwilling) to work by the time we reach retirement age. This is why Paying Yourself First is more of a necessity than merely an interesting idea. If we live off of our own investments at […]

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