Pay Yourself First

Back when I was younger, I had a boss who made the comment, “Of course, you always pay yourself first.” Since my company had a retirement plan, I didn’t pay a lot of attention to it.

But along the way, I began to realize that it’s a valuable part of preparing yourself to have money when you need it, like when you get to my age and don’t feel like working any more.

Here are some things I have figured out over the years that might be helpful.

Pay yourself first – Put a percentage of what you make into an account that draws interest and isn’t your primary saving or checking account. If you can have the money deposited automatically, that’s even better.

Up The Ante – Any time you get a raise, increase the amount you put away by a set percentage or a specific dollar amount. Do it before you see the increase so you don’t know it’s gone.

Pay Off Your Bills – Start by paying a little more on your smallest bill. And when you pay that bill off, add the amount you were paying to the next smallest bill, and continue until everything is paid off. Then add half of what you were paying to your savings account every month.

Split the Difference – Whenever you get money you weren’t expecting, or that is not part of your normal income, put half of it in your savings. Use the other half on anything you want.

Use Uncle Sam – Set up your payroll deduction at one less that you would normally claim. If you are alone, claim zero. If you are a couple, claim one. At the end of the year, when you get your refund, put it in your savings.

Save for What You Want – Before you buy anything, save the money for it. The more you can pay for without using credit, the better off you will be.

Use Payment Plans Wisely – For bigger purchases – cars, furniture, houses - use credit or payment plans rather than using all your available cash, so you don’t end up having to use your long-term savings.

Use Credit Safely – Use credit only if you need to, because you will be paying more for what you get. If you buy something on credit, pay it off before you buy something else on credit.

Don’t Make Rash Decisions – Take some time to think about purchases. Walk away from non-essential purchases to give yourself time to think. If you really want something, and can afford it, go ahead and buy it.

Get Rid of Something – If you buy something new, donate what you currently have. You won’t have as much stuff and you may be able to deduct your donation from your taxes and come out ahead.

Enjoy What you Buy – Once you decide to buy something, don’t feel guilty. Use it, enjoy it and have a good time. If you have extra money, and you have saved what you should, you get to spend your extra money on whatever you want.

Start Over – If you have to use your savings, to buy a house or cover an unexpected emergency, start over. It’s never too late to start paying yourself.

This will help you prepare for the future. The larger your savings account gets, the harder it is to take money out. Enjoy watching your savings account grow every month and feed it whenever you get a chance.

Someday, you won’t feel like working anymore, and it’s nice to be prepared.