February 8th, 2013

When it comes to accumulating wealth paying yourself first is one of the most important concepts to understand. What does paying yourself actually mean? When should you pay yourself, and why?

2 thoughts on “February 8th, 2013”

  1. Aaron Howard says:

    When your goal is to accumulate wealth, it’s not enough just to not spend all your money. It’s essential to find a way to save money. Paying yourself first means that when making a budget you consider the amount you save and invest to have the same priority as your other required expenses. Paying yourself first doesn’t mean you get to buy something extra every month, it means you reduce other expenses to make it possible to start saving every month.

    You should make paying yourself automatic. Work with a bank, employer or an low overhead cost investment company like vanguard or tiaa-cref to automatically deduct your savings. You pay yourself because you can make money work for you in addition to you working for your money. Having money in the bank is likely to make you more successful in life. For example marriages with over $10k in savings are more likely to stay together. There’s something psychologically valuable about not being broke. In fact even having a plan improves the outlook.

  2. Mike Finley says:

    Beautifully said, Aaron. Let me add just a bit more. Pay yourself first at the beginning of the month BEFORE you spend any money. Save first, spend last and never mix these two up. See yourself as the first debtor you must pay. Just as Aaron stated, put it on automatic and never look back. If something must give in balancing the monthly budget, make it the spending, not the saving. Aaron’s explanation explains why.

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