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Pay yourself first. Sounds quite easy to do, but very few are doing it in practice. In fact, these three words may be what makes the
difference between being rich or being poor. The way you deal with your money
is a huge pointer of whether you will live in lack or plenty.
Now
if there’s anyone who really understands how to amass wealth,
then it should be Warren
Buffett. Warren’s currently the 3rd richest man in the world,
with a net worth of $84 billion. There
are surely very few experts on the subject of money with the results that
Buffett has.
It
is sound wisdom to listen and take heed of what the experts are saying. Mr
Buffett reportedly stated, “Do not save what is left after spending; instead
spend what is left after saving”. In other words, you should keep some of your
earnings for yourself, not spending all of it. Usually nothing is left after
spending.
So
in the simplest possible terms paying yourself first requires a different
approach to handling your money. Stop thinking about your bills and expenses
first. Refrain from spending a certain percentage of your income. And this is
essentially what the rich people do.
Even
though this sounds quite simple and easy to do yet many are not doing it. And
there are a lot more people who are not doing it consistently. Riches and wealth
building is not complex. The continuous application of
simple steps like paying yourself first will lead to wealth in the future.
Here
are 12 benefits of paying yourself first. I’m sharing them in order to ginger
you to make this part of your lifestyle:
Funds are available for
investment
Nearly
everyone bemoans a lack of capital to invest.
How can there be when you’re spending everything you make paying bills? Don’t
just keep funds aside for keeping sake. Put it to work to produce more for you
by investing it wisely.
Please
note that savings alone
cannot make anyone rich. It is saving + investment that leads
to wealth and riches.
Paying yourself first is the
rich man’s approach to building wealth
This
is clearly one of the methods the rich use to build wealth, that the poor tend
to neglect. And money discipline is one of the qualities of the rich. Wealth
building requires resources. “You need money to make
money” as the old adage goes.
Business
people normally start out solely funding their business
ideas. After a while he/she might seek for additional
funding. It’s money saved that’s available to be used for starters. This is the
way nearly all successful businesses start out.
You learn to live on less
Dedicating
a portion of your earnings as yours means there will be less to live on. Paying yourself first means
living off the rest, no matter what. And you can’t go back to spend what you’ve
kept aside for investment purposes.
Granted
it’s tough living on less. But when you consider what that money you’ve kept
aside can do, it’s worth the effort. At the end of the day you’ll definitely be
better off for having done this.
Investing becomes a priority,
not an after thought
Investing is very important. It’s the key to building serious and lasting wealth. But too many
people hardly think about it at all. They’re too busy thinking about how to pay
their monthly bills and make ends meet. Now that’s a dangerous way to live
life.
Investing
should take priority over paying bills. And those who want to come out of the
rat race would do well to make investing their priority. It makes one better
positioned to take advantage of opportunities for
wealth building.
Your money counts toward
something worthwhile
You
deserve better than to put a huge chunk of your earnings towards your expenses.
A portion of your earnings is available to be put towards your financial
future. And that’s far better than paying bills and making
purchases every month with all that you make.
Life
would surely be unfulfilling if you don’t strive to achieve something
worthwhile. Paying yourself first gives you a chance to use these resources to
push for a better life. With riches comes a better life.
Securing a future income
Securing
a future income is a cardinal law of wealth. Those who desire to be wealthy
know the importance of a future income. They’re willing and driven to make
sacrifices now in order to achieve their wealth goals in the nearest future.
It
pays to embrace discipline and frugality in the present with the hope of
securing a future income.
Investing one’s savings wisely would lead to this positive outcome.
Prioritise your spending
When
there’s less to spend it means spending patterns will have to change. Spending
decisions will be subject to more analysis and scrutiny. And going forward sacrifices and cuts will have to be made. "Is this necessary?", "Can I
do without it for now?" are some of the questions you might ask before spending.
Clearly
if something’s not a priority it will not be spent on, pure and simple.
Embrace Budgeting
A budget is
a strategic document that helps you to know where your money is going. It
provides one with clarity regarding the ins and outs of one’s money. Greater
monitoring and control can only lead to a greater understanding of one’s financial
affairs.
A
future financial goal acts as a major incentive to make better use of one’s
current earnings. The more concerned one is about his financial state, the more
the use of tools like a budget to track your money.
The ability to start saving
small-small towards your future
Great
things start small. And there’s wisdom in starting to take small steps towards
a secure financial future. Start by saving small sums first. And gradually
increase the amounts over time, especially when your earnings also
increase.
The
future you desire is still some ways ahead. But you will need funds to make it
a reality. It’s not too late to start out now, no matter how little. It’s not
starting at all that is unacceptable. So start where you are with what you can keep
aside.
Builds discipline
Kentin Watts in his
article, “7 reasons you
really need to pay yourself first (seriously)” stresses that
it builds discipline. And discipline is seriously required to achieve anything
or to attain any height in life.
Wealth
building thrives on the notion of postponing gratification of desires till a
later time. You’re expected to put your desires in check and channel some of
your resources into more productive pursuits. This is what the rich are able to
do constantly and consistently.
Paying yourself first is sound
financial strategy
Wealth and
financial success is the product of strategy. While strategy is a series of
steps and actions that must be taken in order to receive the right results. The
experts on wealth creation have used it to good effect in their journeys to
wealth. You should not neglect to do the same.
The
poor will definitely achieve the same results as the rich if they apply the
same strategies the rich are using. Financial success is impartial. An
application of the same winning strategies will lead to the same results for
anyone.
Psychological Rewards
It’s
easy to become frustrated with having nothing to show for time spent at a job
or career. The process of keeping something aside leads to a positive mindset.
This ensures that you’ll get something out at the end of the day. At least there’s
something to show for your efforts.
Meeting
your monthly or weekly savings goals can act as a boost to your morale. You get
the feel good jolt of a job well done.
The final word on paying
yourself first
In
conclusion here are 7 further facts about paying yourself first:
1.
Whatever you save must be carefully invested
to generate further returns. Check out my article on how to avoid scammers
before investing here;
2.
Automate your savings. Instruct your bank to
take out this money and move it to a separate account;
3.
Make it difficult to get your hands on these savings so
it’s not diverted to other wasteful expenses;
4.
Money spent on expenses cannot be regained.
It’s only money kept aside and invested that can provide you with returns and a
future income;
5.
Always aim to invest the money as quickly as
possible. Make plans on what to invest the
money on in advance;
6.
Endeavour to keep some money aside for
emergencies as well. An emergency fund is
a good idea;
7.
Your expenses will always rise in an attempt
to overtake income so you can spend more than you make. Do your best never to
allow this to happen. That’s why it’s important to track your expenses.
Finally
it’s time you got on the bandwagon of paying yourself first in order to secure
a future income for yourself. Starting out and keeping at this will lead you to
wealth and financial success sooner than later.
PROFILE
Kenneth Doghudje is intensely committed to seeing people achieve
their financial goals and aspirations in Africa. A CEO by day and a Blogger by
night, he believes that the secret to anyone succeeding financially is to mix
workable insights with action which translates to wealth and riches.
Please endeavor to visit www.moneytalkNG.com
for more articles on money and personal finance. You can also sign
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