I follow in my stepfather’s footsteps to “pay me first”
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- My stepfather retired comfortably at age 63 by following a few simple money rules.
- One of its rules that helps me build wealth is “pay you first”. Before paying any bills, my husband and I contribute to our savings and retirement accounts.
- Before we started paying ourselves, we tried to put away the money that was left at the end of the month – but there was rarely anything left to save.
- SmartAsset’s free tool can find a financial planner to help you take control of your money ”
For me and my family, have a budget has been the key to paying down debt, saving and investing more for our future. One of the things I love about budgeting is that there is no one-size-fits-all solution. I changed my budgeting method and practices a few times over the past few years, and it has only improved my financial life.
As I start to focus more and more on investing and getting off to a good start with retirement savings, my husband and I have started using a well-known strategy that essentially reverses the traditional budget. See how my stepfather comfortably retired Without a pinch or strict budget, we have chosen to follow suit and use the “pay yourself first” strategy.
What does “pay you first” mean?
When payday arrives, my natural instinct has always been to see what bills to pay. The mortgage is always due on the first of the month, then there are utilities and household needs. Cabinets can look a bit empty, hinting that it’s time to order groceries.
While all of these expenses are significant, I decided to prioritize myself first. This means that I often look at my savings and investment goals first and transfer money to those needs. before budget for the rest of my monthly bills.
Some of the habits I have developed with this method include:
- Transfer $ 500 to my IRA each month to maximize contributions for the year
- Set up direct transfers to my high yield savings account where I keep my emergency fund
- Automatically save money for my son’s college fund
Being self-employed, I don’t have access to a 401 (k) where I can make easy pre-tax contributions even before my paycheck reaches my account. However, an IRA is just as useful, and I set up automatic transfers through Betterment, a
, so I don’t have to think about it.
It was a little scary at first to transfer a huge amount of money to savings and investments in the first place, but it works a lot better for me than making saving an afterthought. I’ve spent too many years thinking that I would build my emergency fund Where put money for retirement at the end of the month if there was money left. Most of the time, there was nothing left.
By paying ourselves first, my husband and I make sure we address our key financial goals early on. Then we budget everything else with what’s left.
Budget for everything else
Budgeting for everything else with the payment model yourself first isn’t difficult when you live below your means and keep high interest debt to the bay.
My husband gets paid weekly and I get paid at different times of the month as a freelance writer, so we aim to sit down and discuss our expenses for each week. It’s often his payday or after, and after we’ve paid ourselves first.
Yes, I could probably do something with the $ 500 I automatically send to my IRA each month with all the other money we save by paying ourselves first. But since it is not available, we learn to make it work with what is left.
Once priority needs and expenses are covered, we tend to focus on flexible spending last. These are things like memberships, clothing, entertainment, shopping, and dining.
Try not to limit desires
By paying myself first, I feel like I have more freedom and flexibility when it comes to desires. Some months we may have less to devote to our desires, especially if we are working towards a specific goal.
However, if I want to order something that I see online, order a meal for dinner, or buy a birthday present for someone, I can do that without worrying about having enough money to save at home. end of the month.
Since getting paid first, I’ve already made progress on all of my savings and investment goals. This decreases the pressure to pinch or budget strictly.
I’m on track to save a lot more this year
My income hasn’t really increased drastically this year, but I’m on track to save a lot more than ever before. I will be able to maximize my retirement savings for the first time, we have achieved several house projects, and I regularly save for my son’s college education instead of making excuses for not having enough (as was the case for several years before I started paying myself first).
Paying yourself first is a great habit that can teach you to mentally prioritize saving, investing, and your personal financial goals. There will always be bills and living expenses to pay, but it’s important for me to know that I’m putting myself first, preparing for the unexpected, and securing my future at the same time.
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