12 Wonderful Benefits Of Paying Yourself First
Paying yourself first. Sounds quite easy to do, but very few are doing it in practice. In fact, these three words may be what makes the difference between being rich or being poor. The way you deal with your money is a huge pointer of whether you will live in lack or plenty.
Now if there’s anyone who really understands how to amass wealth, then it should be Warren Buffett. Warren’s currently the 3rd richest man in the world, with a net worth of $84 billion. There are surely very few experts on the subject of money with the results that Buffett has.
It is sound wisdom to listen and take heed of what the experts are saying. Mr Buffett reportedly stated, “Do not save what is left after spending; instead spend what is left after saving”. In other words, you should keep some of your earnings for yourself, not spending all of it. Usually nothing is left after spending.
So in the simplest possible terms, paying yourself first requires a different approach to handling your money. Stop thinking about your bills and expenses first. Refrain from spending a certain percentage of your income. And this is essentially what the rich people do.
Even though this sounds quite simple and easy to do yet many are not doing it. And there are a lot more people who are not doing it consistently. Riches and wealth building is not complex. The continuous application of simple steps like paying yourself first will lead to wealth in the future.
Here are 12 benefits of paying yourself first. I’m sharing them in order to ginger you to make this part of your lifestyle:
Funds are available for investment
Nearly everyone bemoans a lack of capital to invest. How can there be when you’re spending everything you make paying bills? Don’t just keep funds aside for keeping sake. Put it to work to produce more for you by investing it wisely.
Please note that savings alone cannot make anyone rich. It is saving + investment that leads to wealth and riches.
Paying yourself first is the rich man’s approach to building wealth
This is clearly one of the methods the rich use to build wealth, that the poor tend to neglect. And money discipline is one of the qualities of the rich. Wealth building requires resources. “You need money to make money” as the old adage goes.
Business people normally start out solely funding their business ideas. After a while he/she might seek for additional funding. It’s money saved that’s available to be used for starters. This is the way nearly all successful businesses start out.
You learn to live on less
Dedicating a portion of your earnings as yours means there will be less to live on. Paying yourself first means living off the rest, no matter what. And you can’t go back to spend what you’ve kept aside for investment purposes.
Granted it’s tough living on less. But when you consider what that money you’ve kept aside can do, it’s worth the effort. At the end of the day you’ll definitely be better off for having done this.
Investing becomes a priority, not an after thought
Investing is so important. It’s the key to building serious and lasting wealth. But too many people hardly think about it at all. They’re too busy thinking about how to pay their monthly bills and make ends meet. Now that’s a dangerous way to live life.
Investing should take priority over paying bills. And those who want to come out of the rat race would do well to make investing their priority. It makes one better positioned to take advantage of opportunities for wealth building.
Your money counts toward something worthwhile
You deserve better than to put a huge chunk of your earnings towards your expenses. A portion of your earnings is available to be put towards your financial future. And that’s far better than paying bills and making purchases every month with all that you make.
Life would surely be unfulfilling if you don’t strive to achieve something worthwhile. Paying yourself first gives you a chance to use these resources to push for a better life. With riches comes a better life.
Securing a future income
Securing a future income is a cardinal law of wealth. Those who desire to be wealthy know the importance of a future income. They’re willing and driven to make sacrifices now in order to achieve their wealth goals in the nearest future.
It pays to embrace discipline and frugality in the present with the hope of securing a future income. Investing one’s savings wisely would lead to this positive outcome.
Prioritise your spending
When there’s less to spend it means spending patterns will have to change. Spending decisions will be subject to more analysis and scrutiny. And going forward sacrifices and cuts will have to be made. Is this necessary? Can I do without it for now? are some of the questions you might ask before spending.
Clearly if something’s not a priority it will not be spent on, pure and simple.
Embrace Budgeting
A budget is a strategic document that helps you to know where your money is going. It provides one with clarity regarding the ins and outs of one’s money. Greater monitoring and control can only lead to a greater understanding of one’s financial affairs.
A future financial goal acts as a major incentive to make better use of one’s current earnings. The more concerned one is about his financial state, the more the use of tools like a budget to track your money.
The ability to start saving small-small towards your future
Great things start small. And there’s wisdom in starting to take small steps towards a secure financial future. Start by saving small sums first. And gradually increase the amounts over time, especially when your earnings also increase.
The future you desire is still some ways ahead. But you will need funds to make it a reality. It’s not too late to start out now, no matter how little. It’s not starting that is unacceptable. So start where you are with what you can keep aside.
Builds discipline
Kentin Watts in his article, “7 reasons you really need to pay yourself first (seriously)” stresses that it builds discipline. And discipline is seriously required to achieve anything or to attain any height in life.
Wealth building thrives on the notion of postponing gratification of desires till a later time. You’re expected to put your desires in check and channel some of your resources into more productive pursuits. This is what the rich are able to do constantly and consistently.
Paying yourself first is sound financial strategy
Wealth and financial success is the product of strategy. While strategy is a series of steps and actions that must be taken in order to receive the right results. The experts on wealth creation have used it to good effect in their journeys to wealth. You should not neglect to do the same.
The poor will definitely achieve the same results as the rich if they apply the same strategies the rich are using. Financial success is impartial. An application of the same winning strategies will lead to the same results for anyone.
Psychological Rewards
It’s easy to become frustrated with having nothing to show for time spent at a job or career. The process of keeping something aside leads to a positive mindset. This ensures that you’ll get something out at the end of the day. At least something to show for your efforts.
Meeting your monthly or weekly savings goals can act as a boost to your morale. You get the feel good jolt of a job well done.
The final word on paying yourself first
In conclusion, here are 7 further facts about paying yourself first:
- Whatever you save must be carefully invested to generate further returns. Check out my article on how to avoid scammers before investing here;
- Automate your savings. Instruct your bank to take out this money and move it to a separate account;
- Make it difficult to get your hands on these savings so it’s not diverted to other wasteful expenses;
- Money spent on expenses cannot be regained. It’s only money kept aside and invested that can provide you with returns and a future income;
- Always aim to invest the money as quickly as possible. Make plans on what to invest the money on in advance;
- Endeavour to keep some money aside for emergencies as well. An emergency fund is a good idea;
- Your expenses will always rise in an attempt to overtake income so you can spend more than you make. Do your best never to allow this to happen. That’s why it’s important to track your expenses.
Finally it’s time you got on the bandwagon of paying yourself first in order to secure a future income for yourself. Starting out and keeping at this will lead you to wealth and financial success sooner than later.
Note: This article originally appeared at MoneyTalkNG.
Category: Personal Finance
