Pay Yourself First*

If you read The Richest Man in Babylon, The Wealthy Barber, The Automatic Millionaire, or any other decent book on financial wisdom you will invariably find this advice:

"Pay yourself first."

In other words, put aside a percentage of your money for saving and investing before you pay for life's expenses and luxuries. This money becomes the seed for your future wealth. Combine it with that other great principle:


"Live within your means (spend less then you make)."

and you are setting yourself up for financial prosperity. As long as you save and invest that money wisely (most places say to pay yourself first at least 10%) you will be able to escape the trap of living paycheck to paycheck and grow your money substantially. Also, no matter how poor you are, almost anyone can afford to save 10% of their income. Trimming 10% is usually no problem - try it and I doubt you will not see your life impacted in any significant way.

When Jobina and I first got married we were lucky enough to hear the advice to save 10% of our income every month. Basically we were told to use it as an emergency fund - something to pay for extra surprise expenses. This worked well for us but the problem was that we never invested that money - instead it either saved us when we got into financial trouble (usually through overspending) or we got undisciplined and just spent it on something "nice for ourselves." Instead I wish we would have not only put money away for emergencies/luxuries but also had the knowledge and discipline to save and invest 10% of our income, paying ourselves first. This would have been a great strategy.

As the new year is coming up it will be time to reevaluate our finances and goals for the future . . . and it could be a great opportunity for you to do the same gentle reader! Pick up a copy of one of the previously mentioned books and let it both educate and inspire you to being wiser with your money. Don't use the excuse of your debts, life situation, or low income to not take action. Try this simple exercise:

1. How much money would you save if you saved 10% of your household income for the next 1, 2, or 5 years? Grab your calculator!
2. Ask yourself: "What would it take for me to to be able to save 10% of my current income?" You might need to cut back on some expenses, go without a few things, or consolidate some debt. Realize the truth: after some initial sacrifice it wouldn't be as hard as you thought.
3. Challenge yourself to a 6 month experiment - save 10% of your monthly income by paying yourself first and moving that money into a separate account from your main one.

If you aren't currently paying yourself first and would like to try this experiment (and your mate if applicable enthusiastically agrees), feel free to let me know. Also, pick up one of the books mentioned at the start of my post for inspiration and wisdom. If you try the experiment and it significantly impacts your life in a bad way, let me know and I'll take you out for dinner to try to make it up to you! But I'm not too worried - paying yourself first is one of the wisest ways to manage the financial resources that God has given you. Good luck!

*A few people have commented to me that my post could be interpreted as saying that paying yourself first is more important then even giving back to God - definitely not what I want to say! Giving generously should be your first financial priority, but out of your remaining money paying yourself first is just smart use of your money.