Save First, Eat Later

Is your monthly budget depressing?  Saving or investing are probably the last things on your mind if that's the case, but it shouldn't be.  Paying yourself first is a tip I first read about in Rich Dad, Poor Dad over a decade ago and it is still the best money advice you can practice.

The concept is simple: when you receive any form on income, before you do anything else with the money, pay yourself first.  You are your most important account.  Before you pay your electricity bill or go buy groceries, set money aside.  Some of you are probably thinking that sounds absurd, obviously paying your mortgage should come before stacking cash in a savings or investment account, shouldn't it?  The answer is no.  This advice isn't just about trying to save money, it's a practice that teaches you to value saving over spending.  By mentally training yourself to pay yourself first you have placed a level of importance on saving that may not have existed before. Through repetition of this practice saving money becomes engrained into your being as a habit and a necessity, not just a back-up plan in case you have an extra $25 laying around.

So now you want to know how to do this?  It all starts with a budget.  A personal budget is the foundation of any form of financial success.  Determine your base needs and compare it against your income.  Items like cable TV and high speed internet are not necessities and therefore should not be listed yet.  Mortgage, electricity, water, and gasoline are examples of base needs to get to work and not lose your house.  After your base needs are listed choose a number to save.  It can be $20, $50, $300.  Now prioritize this number to the top of your budget.  All the rest of your spending needs to reflect changes that allow for this savings amount to be paid to yourself.  The savings amount you have determined has now become an expense, a requirement.  If you fall $20 short of being able to pay yourself then you need to make changes elsewhere, such as losing the MLB package from your service provider or cutting back on eating out one or two nights a week.  

The results will amaze you.  If you are paying yourself first each paycheck you will watch your money grow and your financial worries decrease exponentially.  Luck is not needed, only desire and practice.  Happy saving!