A helpful piece of money advice that I heard a long time ago was to “pay yourself first”. In other words, put aside a certain amount of money each month before you pay your bills, before you pay your mortgage, before you buy that blouse or suit you’ve been eyeing, before anything else monetary. Sounds ridiculous, right? How do you put money aside when your utility bill has come due and your bank account is lower than it’s ever been?
A few years ago I started to do this. Just a small amount at first. Believe me, it was tight. As I paid myself first and then proceeded to pay bills each month, there wasn’t much left in our account. I kept at it though. Eventually, I was able to increase the amount I put away each month. Even though it was difficult, I managed to sock away enough eventually for my family to go on vacation. It does work.
I think I first heard this advice from Suze Orman. Remember her? I saw her on Oprah way back when when she used to appear on Oprah’s show maybe once a week or every two weeks to give financial advice. I have always found her advice to be very logical and commonsensical. When she first mentioned paying yourself first, I did think to myself how farfetched that sounded. My bills come first! At this point, though, having done it and seeing my account build, I realized it’s good advice. In the video below she talks about budgeting and debt and putting something away for the future.
But as far as paying yourself first, imagine if you just started out with $25.00 a week to put away into a separate account. I found when I started putting money into a separate account it kept me, in my mind, from seeing it as being accessible. Psychologically, I pretended it was not there, that account didn’t exist. It had nothing to do with my chequing account, the account I used for everyday bills. Putting away $25.00 per week, would give you $1,300.00 at the end of the year. That doesn’t seem huge, but where would that $1,300.00 be at the end of the year if you didn’t put it away? Now, imagine if you kept putting away $25.00 per week for 5 years. That means at the end of 5 years, you would have $6,500.00 saved up. Enough to take a small vacation! Not bad, right? And what is $25.00 per week. Lunch with friends on a Friday, a movie and maybe a popcorn, coffees for the week? Another way to do this, instead of just guessing at an amount (because I’m not one for budgets), is to figure out all your monthly expenses and deduct that from your take-home pay. Once you know what you have left over, take a percentage to pay yourself first.
I pay myself first on the first of every month but you could pay yourself first every time you receive your paycheque. Take a small portion from your paycheque and deposit it to a separate account. You decide how much you can afford to put away and keep put away. Even the smallest amount is better than nothing. Don’t touch the account, don’t even look at the amount in that account. Before long, you will have some money saved up and that money could well come in handy for something that you absolutely need to purchase or, even better, that you want to purchase.