It's fun to buy things for yourself or others. You know the satisfied feeling you get when finally acquiring that special item you have been longing for. Spending money on what you want is nice to be able to do.
However, more important than spending money is paying yourself first. You take priority over any bills or other expenses. Paying yourself first is money you put away for later, not a fund to be used for more or larger purchases.
Paying yourself first has many benefits. A growing bank account provides you with freedom. You will be in much better shape to weather economic downturns. You’ll have greater ability to deal with unexpected emergency expenses. Your self-confidence will grow with the self-discipline you develop.
Imagine how nice it would be to have enough put away to cover your living expenses for one year. Your money related stress level will drop. You wouldn't feel held hostage by a job you don't like.
Consider paying yourself first as building up your freedom fund. Although it takes financial discipline to make it grow, it's well worth the effort. How much would you have today if you started paying yourself 10% of your take home pay 5 years ago? Even had you saved only 5%, how much would you now have in your account?
Unless you change your habits, five years from now you will be in the exact same financial position, or perhaps even worse. A change in strategy is required in order to attain different results.
You might argue you don't have enough extra money to pay yourself first. Your income is too low or your expenses too high. Regardless of your current financial situation, you can pay yourself something.
Paying yourself first is an issue of attitude, not finances. Are you familiar with the lottery syndrome? Some studies show as many as 90% of multimillion dollar lottery jackpots winners have lost their entire fortune within five years. Many are in worse financial condition than before their win.
Yet there are many examples of individuals starting from nothing and building a fortune. How you think about what you have is more significant than how much you have. Additionally, you can find numerous instances where someone has built a fortune, lost it, and then accumulated it again.
One of the basic principles required to grow your finances is the ability to accurately distinguish between needs and wants. A need is something genuinely essential; you can't survive without it. A want is anything that although nice, is not required for your survival. You need food, shelter, clothes, transportation, etc. All else is optional. You want a new car. You want to go out to eat. You want to go away on vacation.
In order to pay yourself first, you must consider it a need. It should take precedence over all else. The exact amount isn't important. It's the fact that you always pay yourself first, no matter what, that's important.
Another strategy to assist paying yourself first is living below your means. This involves spending less than you can afford for both your needs and wants. By so doing, you can pay more to yourself than if you were spending the money elsewhere.
Paying yourself first is a proven strategy for building financial security. Financial security reduces stress and enhances your options. All successful people pay themselves first. It’s a great habit that is not hard to develop. The exact amount doesn’t matter. Starting today, make sure to pay yourself first.
NOW AVAILABLE: "Dare to Live Without Limits," the book. Visit www.BryanGolden.com or your bookstore. Bryan is a management consultant, motivational speaker, author, and adjunct professor. E-mail Bryan at firstname.lastname@example.org or write him c/o this paper. 2013 Bryan Golden