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Always, pay yourself first!

Being Selfish and Strict about this Habit will Guarantee you a very Wealthy Future and Financial Stability.

Posted on January 15, 2023January 22, 2023 by budgetsense
Always, pay yourself first!
Always, pay yourself first!

PYF: the greatest and most underrated acronym on your road to financial riches and freedom.

Pay Yourself First, darn it!

If you pay yourself first , you don’t feel the pain. You get it out of the way and you can then focus on spending, enjoying and using your money to helping others. No guilt. The reverse could lead to guilt and ‘what ifs’.

First, you need to automate it so that the money is being redirected to a saving or investment account before you even see it. This removes friction and any pain points. It takes minutes to set up , but the future rewards will be massive and may help you live on passive income way before your official retirement age.

How much should you contribute? This will vary from person to person, but the more the better, assuming you have room to cover your living expenses and other needs. And while 10-25% is ideal, anything is better than nothing. For example, if you make $1250 bi-weekly and can only afford to set aside $50 a paycheck, that is still better than not putting anything at all. Overtime, as you cut expenses, increase your income or both, you need to increase this amount.

Imagine if you you pay yourself last. First, there will likely be no money left and will feel like a burden to save. Furthermore, if you have to rely on manually saving money, you are adding friction to the whole process which just complicates things. When it comes to wealth accumulation, automating things and reducing friction goes a long way. On the other hand, adding friction to negative habits you want to break is a the right way to go. For example, make it harder to spend money. That is adding friction to the process.

Think about it: we already automate bill payments , why not automate PYF? there are consequences (interest penalty) to not paying your bills on time but no visible or immediate consequence to you not paying yourself by saving money. We need to mentally change that so that paying yourself first and automating it is just as important as automating your bills to avoid interest charges. Set it and forget! Before you know it, and after compounding has done its magic, you will look at your savings and all the investments statements and you will not only be happy you paid yourself first, you will be amazed at how magically the money grew. As Einstein remarked, compounding is the eighth wonder of the world. If Einstein can fetch for it, then you can surely trust it.

And if that is not enough, I will leave you with one last quote, from none other than our generation’s foremost financial genius, the one and only Warren Buffet: “Do not save what is left after spending; instead spend what is left after saving.”

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