A part of all you earn is yours to keep, and if you cannot save money, the seeds of greatness are not in you.
-W. Clement Stone
I’ve been thinking about this a lot. We’ve paid off a substantial amount of consumer debt ($137,000), and now we’re using any savings to do a little remodeling of our house. I’m hoping to be done with that soon and then it’s time to start back up our savings with (I’m hoping) the same intensity we had when we were paying off our debt. Only this time, we will be paying ourselves and not someone else!
I’m looking forward to the prospect of being able to save for ourselves like we debt when we were paying off that debt. If he had no debt, that would have been $137K that we would have had in savings today. Just a little more and we could have had our mortgage paid off. Just to think about that debt makes me ill. But we owed it, paid it back and now we’re debt free!
Pay yourself first!
That’s right. Before you pay your mortgage, before your buy groceries, pay yourself first!
How do you do that? Have that money come right out of your bank before you have a chance to spend it. We have a savings account that I set up with my bank that automatically takes a certain amount of money out of our checking account and transfers it to the savings account. You could do this manually, but having it automated works best.
Have you ever had more month at the end of your money? Because if you wait until everything else is paid; bills, groceries, etc, you will not have any money left to save. If you do it off the very top, you will (I promise), still have enough money to pay everything else. But this will cause you to be more intentional with your spending.
How much should I save?
Assuming that you are not in debt (if you are, you need to pay that off immediately), I would suggest starting off with 10% of your income. Once you’re comfortable with the 10%, try increasing it as much as possible. The more you save, the faster you can achieve your financial goals; early retirement, investment property, a home, a vacation, etc.
How can I save 10% of my income?
Practice frugality in all things! Most people who are poor today and in retirement are that way because of impulse buying. They see something they like and without much thought at all, they purchase it. Regardless of how much money a person makes, it’s easy to spend all of it (or more than you make).
There’s really no way to achieve any kind of financial goal without sacrificing your standard of living a bit. Here are a few ways that will help you save a few dollars so that you can start paying yourself first.
- Treat your savings as a bill. The first bill to be paid.
- Question every purchase. “Do I really need this?” For most people, a want becomes a need. Know the difference.
- Start tracking your expenses. I still do this today. This is hands down I think the best way for you to find $ to save. Did we really spend that much money on eating out? Cut out one time and you could probably save $30/month.
- Sell some stuff. Find some things you can sell on eBay and/or Craigslist and put away those savings.
- Call your cable/internet company and ask for savings.
- Pick up some overtime. Work a couple of extra hours a week and put all of that into savings.
- Cancel memberships you’re not using. A health club, a magazine subscription, online subscriptions. A long time ago, we belonged to a health club. We had the membership for at least 2 years and paid about $150/month. And how often did we go. When we first joined we went maybe once a week or so, but we stopped going much after a while. I thought that if I keep paying, it will encourage me to go. And there are so many inexpensive ones nowadays that only charge $10/month. Go there instead and put the rest into savings.
- Try a no-spend month or week or one week a month. Just tell yourself you won’t spend any money and then don’t.
- Bring your lunch to work. My hubby has been at his current company for a little over 4 years and has only bought lunch 1 time. Yet most of his co-workers go out to lunch everyday. Can you imagine the savings if you just made your own lunch? This is probably enough to allow you to save 5-10% (maybe?) of your income into savings. If you do buy your lunch, go over your statements/receipts and see how much you’re actually spending.
- Similarly, make your own coffee in the morning instead of stopping somewhere for it.
- Pay cash. It’s been proven that people who use cash spend up to 30% less than those that pay with a credit card. Leave the cards at home.
There really are a million ways you can save money to help you have extra money to put into savings. You will find a way if you really want to. You just need to decide that you do.
If you start paying attention to your money and take your savings off the top, you will learn to live within your means. You will easily get used to it. You adjust to living on less.
Why should I pay myself first? How will this change my life?
It can make you wealthy, possibly even a millionaire some day. It can save your marriage (money fights and disagreements being of the main reasons for divorce). It can make you sleep better, knowing you don’t have to worry so much about money. The reasons are endless. Who wouldn’t want to have a little more money than they do now?
I love what Brian Tracey has to say about paying yourself first.
Resolve today that you are going to save and invest at least 10 percent of your income throughout your working life. Take 10 percent of your income off the top of each paycheck each time you receive one and put it into a special account for financial accumulation. The fact is that if you save just $100 per month throughout your working lifetime and you invest that money in an average mutual fund that grows at 10 percent per annum, you will be worth more than one million dollars by the time you retire. This means that anyone, even a person earning minimum wage, if he or she starts early enough and saves long enough, can become a millionaire over the course of his or her working lifetime.
No more excuses. Just do it!
Are you ready to pay yourself first?
Image Credit: Unsplash and Flickr