Today I want to discuss with you why it is important that you pay yourself first.
First off, let’s talk about the concept because for ages I just didn’t get it. I had heard about it, I knew I should do it, but I was like “what, what are you talking about?”
The concept is actually quite simple. It basically says that before you pay anything else, bills, housing etc – you actually put some money into savings for yourself first.
As I have since found out – this is something that the Babylonians so many years ago had as their number one rule for their finances. We just seemed to have lost it along the way.
So why is it important that you pay yourself first?
Make your personal savings your number one priority. Psychologically the reason why you must pay yourself first is because you are telling yourself you are worth it. You are worth the money to be put aside. Yes, you are worth to be a priority over anything else.
Effectively you are confirming to yourself that you are important and that you are the number one priority.
Secondly by doing something constantly, you are building discipline. As you can see the money growing up, you are going to start saying “hey, look at that. I can do this.”
Once you can start to create discipline in one area of your life, you can bring the same discipline into any other area of your life that you wanted to work on.
You will also start to feel confident that you can handle money better and in your abilities. Which again will reflect onto other areas of your life.
Let’s step away how you will feel psychologically and instead look at the cold hard facts.
What other benefits are there to paying yourself first?
By building the habit, you will enable yourself to stick to other financial goals.
The paying yourself account is one thing, but when you can see the money grow you can see how you can use the same strategy to fund money for your holidays or for the new car (or whatever else you want to save money for).
You can use your savings account or a portion of your savings account, but realistically the “pay yourself first” account is there to create passive income for yourself.
So, it’s really important that you use your pay yourself first account once it gets bigger for investing.
Be it your retirement (by investing in your super) or an investment capital towards a business or perhaps putting it towards another property. You might even want to put it towards shares – it’s up to you!
If you combine your pay yourself first account with an investment strategy, you will be able to create another source of income.
Another great benefit to this new habit, is learning to live on less. I had a chat with a client yesterday and when we ran the numbers I showed him he had money left over.
He said, “no way that I do, it always just seems to disappear”. Now if you pay yourself first that money is gone – so you must learn to live on whatever is left. Now don’t make it difficult for yourself and so tight that you don’t have anything left. Even a start on $25 a week put aside is great.
$25 a week might mean that you buy less takeaway, cigarettes or alcohol each week (or whatever you spend your money on).
You’re going to make yourself and your finances a priority from this process. It stops being an afterthought. You’re using your awareness to be able to put money aside to be able to live on less and to be able to think about your future and figure out what you’re going to do to start the money working for you.
As you are now living on less, you also learn to spend mindfully.
Now yes you might start on $25 per week, but if you’re courageous and say “Hey, I am pretty sure I can put aside $100 per week” then you will put into a position where you will be put outside of your comfort zone and you will have to REALLY consider what you spend the rest of your money on. You must start to become a mindful spender.
There are so many reasons why you should pay yourself first, so just do it!