Seems strange to think about- the concept of paying yourself first. The Richest Man in Babylon is a book by George Clason is a parable that illustrates this timeless concept. If you want more money in your older years, you need to remember to pay yourself first and put the money into a savings/ retirement plan.
So my new financial goal will be paying myself first. How will I accomplish this? I will take a certain percentage of my paycheck income and automatically move it from one of my checking accounts to a savings account as an emergency fund. Do we ever really plan for emergencies? And if we do- what usually ends up happening to take care of them? We bail ourselves out with credit cards (money we don’t really have to spend) and end up spending decades paying it down because it seems like we never get caught up.
The inspiration for the percentages of income to set aside for the emergency fund comes from a new book I read called The Money Book for Freelancers, Part-Timers, and the Self-Employed by Joseph D’Agnese and Denise Kiernan. The authors remind people that it may take some time to build up a nest egg of 3-6 months of living expenses, but you would be surprised if you work with percentages how fast it can build up.
In the case of my wife and I, we get paid on different schedules. She receives a check every other week, and I get paid weekly. Thus we could consistently be putting money into our emergency fund weekly, and every other week build it up a little faster with two paycheck percentages going in. Also, when you receive bonuses or unexpected money, you can take a bigger percentage and sock it away in this emergency fund for the future.
Right now I think 3% of my weekly take home income would be a good number to start with. Once we get comfortable with that amount and see it’s not a great loss to what we normally spend our money on, I may up the percentage. George Clason talks about the magic number being pay yourself the first 10%- as does current finance expert David Bach.
I think if you start off with a smaller number, you will see progress (albeit at a slower rate) that should inspire you to keep moving forward. Much like when you are trying to change other consistent habits in your life, you don’t want to go for everything all at once. You can’t lose 50 lbs. in one week, you can’t run a marathon the first day you want to pick up running, and so forth.
I would agree that in these economic times, paying yourself first may not seem easy- but I believe it has to be done or you will not be ready to face emergency times. Job security isn’t what it used to be 20-30 years ago- people are having to shift careers as much as they have to change their clothes. You want to be able to depend upon yourself- and not have these decisions made by others.
I’ll be sure to keep everyone up to date on the progress of this goal, much like my soda-free trial which is now in its 28th day. Team up with others and hold them accountable to their financial hopes and dreams. It’s easier I think to accomplish when you have someone checking up and checking in so you don’t feel like it’s a burden or chore.