Pay Yourself First

One important thing to remember when you are paying bills every month, did you pay yourself first? If you answered no, you need to consider doing this as soon as possible.

What does it mean to pay yourself first? Think about it in terms of retirement. How are you going to fund your retirement? Are you going to rely on the government (please say no)? You need to rely on yourself. Paying yourself first means investing in company offered retirement plans such as 401K. By putting pre-tax money away first, you will ensure that you are protecting yourself in the future.

Paying yourself (first) for later also means saving for an emergency. An emergency fund should have between 6 and 12 months of your salary in a liquid account. Liquid is something that you can readily get at, for example a savings account.

So how can you accomplish saving between 6 and 12 months of your salary? First figure out how much your bills cost you each month and how much you need to set aside. Next, decide what is a realistic and feasible amount for you to put away. Start putting this amount away every month. I recommend a reoccurring transfer from checking to savings or a direct deposit from your paycheck. DO NOT TOUCH THIS MONEY, unless you have to. Finally, once you reach that amount, continue to put that amount of money into some sort of investment since you have accustomed yourself to living without that money.

Questions? Email me at betterbudgets@gmail.com