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Pay Yourself First

There are only 3 basic things you need to do to be financially successful. 1. Spend less than you make. 2. Save and invest for the future 3. Insure against disaster.  Paying yourself first can outright ensure success on #2 and give you a huge advantage on #1.

But what does “Pay yourself fist” actually mean?  Every month you have bills to pay, mortgage/rent, electric company, trash collector, phone bill, gas and so on.  But, before any of these, you need to pay yourself – in other words, making your first payment of each month a deposit into your savings/investment account.

The Genius of Pay Yourself First

Saving can be a challenge. There always seems to be a never-ending series of expenses that demand a piece of each month’s pay. This is the genius of paying yourself first: you always get the cream at the top, instead of whatever is leftover at the end of the month/pay period.

The secret is to prioritize yourself. Make it a point to put your future first. In the beginning, saving may mean a small lifestyle change. But most people are motivated when they see their accounts increase month over month. Finding ways to save becomes a long-term commitment, instead of a short-term hardship.

Putting Your Money to Work

Exactly what you decide to do with your savings will depend on your priorities.

If your priority is retirement, you may want to consider using tax-advantaged accounts. These accounts could include employer-sponsored retirement plans, such as 401(k)s, either traditional or ROTH. This can be an easy way to start because the money comes out of your paycheck before you even miss it. Plus, some employers offer to match a percentage of your contributions.  This could double your money on day one, plus be tax advantaged!

You may want access to some of the funds before retirement, consider putting these funds in a separate account.  For short term goals, we advise saving in an account that will be stable.  Like a bank account or a CD.  However, if your goal is a longer term one, over 5 years away, it may make sense to look for an investment that has the chance for a greater return.  Of course, this may mean exposing your investments to more volatility/risk, so you’ll want to choose what best fits your risk tolerance, time horizon, and long-term goals.

Sound habits can be your most valuable asset.  The earlier in your career you develop these habits, the easier your journey will be and the more potential your savings will have to grow.

We have a team of CERTIFIED FINANCIAL PLANNERS™ at our office, Logan and Linus Whitlock, if you would like a no cost, no obligation second opinion on your financial situation, give us a call or email and we can talk.  Having a professional second opinion can be an invaluable resource, especially if you are indecisive on what you want to do.