I learned the benefit of paying myself first from a challenge with my college roommate. In our last semester, he challenged me to save $20K in my first year working a corporate job. Initially, I didn’t think it was possible, but my friend made a very good point.
He said,
“What will you spend your money on? You’re used to being broke. Stay broke.”
I took this advice to heart and crafted a plan to execute.
Executing The Plan
The first step was breaking the goal down into manageable chunks. I decided to stash away a portion of every paycheck, so I wouldn’t have to think about saving. Checks were paid bi-weekly, so I divided $20K by 26 pay periods to calculate how much I needed to save per paycheck.
$20,000/26 = $769.23 per check
I needed to pay myself $769.23 per check to meet my goal by year-end.
There was no way I could trust myself to keep this money in my checking account. So, I opened up an online savings account that paid 4% per year. I added this account to my direct deposit and had the money automatically taken out of my check.
Over the course of that year, I got used to spending less than I earned, and I hit my savings goal. Doing it automatically was a thing of beauty.
Conclusion
The best budget is the one you don’t have to think about. Paying yourself first ensures you can meet your needs. Automating your savings makes it effortless.
Always remember to pay yourself first.
#ALMOSTVESTED
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Great post and great advice!
Thank you sir. Just trying to be helpful.