Why You Should Pay Yourself First?

You have heard over and over again that you should save money or in the latest terms “Pay Yourself First.” Yet according to this article on Market Watch , About 56% of people in the United States, the richest country on the planet can afford an emergency of only $1000. Less than half of Americans save money. If you take away employer provided 401Ks and other pension plans that some companies offer, you will find an even a smaller number of people who save money on their own.

Unfortunately, the days of working at a company for twenty-five years and receiving a pension are mostly gone and the need to have a “nest egg” saved for retirement grows more important with every generation.

Saving is Easy

Fortunately, technology has made saving money very easy. It is simple nowadays to setup automatic withdrawals from your paycheck. You can now do all of your banking online. By pushing a button, you can save automatically and “forget about it.” Most everyone can automatically save money by enrolling in a 401K program through their employer. If your company does not offer a 401K program, you can save up money every year  in an IRA and pay no taxes on that amount until you reach retirement age, The savings on taxes alone contributes to the money you can save. Saving money is not hard to do! Of course, there are many other ways to save and grow money, If you do some research, or find yourself a financial planner, you could learn about many other ways to save for retirement and lower your taxes.

So why don’t we save money? It’s simple, as a society, we have become addicted to having lots of stuff, and we have to have it now! Little do we think about how much we will need to live on when we retire. Most of us think that we are going to be able to work forever and retirement is  just something that does not cross our minds. In my opinion, life is much too precious to spend all of it working! So, I recommend that you do not spend all of your money before you get to retirement and yes, someday you will either want to or have to retire.

How do you start?

Saving money is easy. Being disciplined about it is just a habit that you have to develop. Here is how you should start. When you receive your next check, think about who you are going to pay first the credit card companies and bill collectors or yourself? The answer is easy, pay yourself first. If we all saved just ten percent of our incomes during our working lives, there would be no need for social security. In fact, there may not be social security available for most people who are now working.

Maybe you think that you cannot live on ninety percent of your income. I challenge you to try. Do it for a month and see if you can live on less. Start by saving ten percent. Take it out in cash, or deposit it into a savings account. Then pay your bills as normal. You spend less on eating out or buying stuff that you truly don’t need. However, you will find that you can live on less each month. The cool thing about saving money is that once it becomes a habit and you see results you will want to save more and spend less! It is amazing how that works. You just have to make the commitment to “pay yourself first”. Paying yourself ten percent is a good number to start with. However, you can increase that number as high as you want.

Pay yourself more

You can pay yourself more!  Why not?  The more you pay yourself, the earlier you can take that trip around the world when you retire! If you really feel that you are overwhelmed with debt and bills, then start with just five percent. When you get a raise give your savings a raise! I do this every year. When I receive a pay raise each year, whatever that amount is, I apply it to my savings. In addition to this, I save more money each month than the ten percent I recommend. The point is to start saving now and make it a habit. You will soon be on the way to finding peace in your financial future. This is much better than hoping you will have to survive on social security when you do have to stop working. So, start investing in your future now!