I’m a strong believer in the fact that the most important bill has to be paid first. And that is the bill to yourself. If you want to start saving and investing it is important to pay yourself first. Or in other words: before you pay your bills, before you buy your groceries, set aside a part of your income. The first bill you pay, after you have received your paycheck, is yourself.
To do this every month requires discipline! Hardcore discipline. Or should I say self-discipline. If you cannot control yourself, it will be very hard to become (and stay) rich. This discipline comes also in handy when it comes to investing (understatement 😉 ). Because in my opinion it makes no sense to invest, make money and then….. blow it. I once read an article that stated that the lack of self-discipline causes most lottery winners to go broke soon after winning the jackpot!
The statement “pay yourself first” comes from: The Richest Man in Babylon, by George Samuel Clason. This is a real bestseller. Probably millions of copies have been sold. But while millions of people read this statement, only a handful follows the advice.
I try to life by this statement and follow the advice of George S. Clason. I have done it since my first job. And yes, I know it is hard. There are always nice gadgets to buy (What about the new IPhone 6. Yes I admit, I’m a real sucker when it comes to gadget). Or I could pay my dentist bill. But before all this, I still pay myself First.
Also in times when my income is low (or should I say: my expenses are to high), I still pay myself first. Part of my money goes to my savings account (see my goals for 2014), part of it goes to the savings account for my family and part goes straight to my broker account.
And although I pay my bills last, I’m smart enough not to get into big financial problems. If in one month it is hard to pay all bills, the next month I’ll live more frugal.
To give an advice is easy, but to follow an advice is real hard. To start paying yourself first, you should develop a habit of saving. This can be done the easiest way by doing it automatically. For instance: Give your bank the order to take a part of your income the moment it arrives on your checking account and put it on your savings account. The first month it is painful (yes you will miss this part of your income), but the next months you don’t even know that a part of your income is missing on your checking account. It is almost as if it has become invisible.
How big the part of your income is you will be saving, is up to you. This figure is different for everyone. For instance I’m saving automatically 20% of my income. And occasionally I also transfer extra money to my broker account (this is necessary to reach one of my goals for 2014).
So Pay yourself first! And let the magic of compound interest do its work.