Paying Yourself First

Paying Yourself First

You worked hard for the money. So hard for it honey! So you need to treat yourself, right? It is finally here…payday!!! You cannot wait to spend that hard earned money. Not so fast! Before you even think about that purchase or paying that bill you need to be paying yourself first. Are you saving for your future or retirement? Do you even have any money set aside for emergencies because those do happen? If the answer is no then you need to keep reading.

Paying yourself first is simple. When you get paid you set aside money in your savings and/or retirement accounts before you start paying your bills or driving out to your favorite store and purchasing that brand new outfit. Now I know at first it can be a little hard to start setting money aside for something else down the line and if you are young you might not be thinking about saving anything for a rainy day especially retirement. But, you will be thanking yourself later in life that you started putting money away when you were young so that you could retire on time or even early.

If that does not convince you then look at it this way.  Your job is ever guaranteed. You might think that you have job security, but in reality, something could happen to that company that you work for and they might need to downsize, layoff people or close their doors for good. That alone should scare you into putting money away. You don’t want to be without money to pay your bills, eat or put gas in your car until you find a new job.

The simplest way to paying yourself first is to do it automatically. If your company offers a 401K then you should already have money being pulled automatically each pay period before Uncle Sam takes his cut. If not then you will need to set up an IRA. There are two types of IRAs. There is the Traditional IRA and then there is the Roth IRA (my favorite). You will need to decide on which one is the best opinion for you. Just visit your bank online if they offer Traditional or Roth IRAs and see which one best relates to you and the amount of money that you bring in annually.

Hoping that you already have a checking account with a banking institution you need to also set up other accounts that you can automatically transfer funds into once you get paid. Have several different saving accounts helps you with what each account is designed for. One can be for emergencies, another is your vacation fund, and maybe one for something big down the road like a down payment on your first home. Once you have these saving accounts setup it is time to designate how much each account will get when you get paid. You can call your bank and have them bi-weekly transfer funds or you can choose the dates that you want money to automatically be transferred into these accounts. Once you do this you are all set and on your way to paying yourself first and having a less stressful financial life.