It has been said that rich people pay themselves first and everyone else second, while poor people pay everyone else first and themselves last, which means they pay themselves nothing at all.
The underlying principle here is that if you want to build wealth you must spend less than you earn. If you do not you go into debt and you never build wealth. If you pay all your bills and make all your discretionary spending first and then save what is left in most cases nothing will be left. If you pay yourself first and pay everyone else with what is left you will build wealth. It is as simple as that even if it is not easy.
To make it easy automate it. Have your bank transfer a percentage of your paycheck automatically into savings and do not spend the savings unless someone’s life depends upon it. Seriously, unless you follow that rule you will spend the savings on something you think you need or want and you will not save much at all.
If your budget is tight look for ways to save money first. Reduce as much discretionary spending as you can to make sure your budget generates a surplus, that is what you are spending less than you are earning. Then save that amount at the first of each month or pay period. A good number to start with is 10%, however if you cannot save 10% then choose a lesser amount. It is important to start with something. Even if you only save 2% that is better than saving nothing. Over time, as you implement all the disciplines we will discuss here you can increase the amount you save.
You will be happily amazed with how this adds up. Let’s say you earn $3000 a month and you save $300 of that. That is $3600 a year. In a decade you will have saved $36,000 plus any interest or return on investments you realize. Ten years from now, if you do not save you will have nothing in the bank. Ten years from now if you save you will have $36,000 in the bank, or whatever amount you have decided to save.
Remember, financially successful people pay themselves first – so you should do that too. Set this program up today and follow it religiously. It is the foundation of building wealth.
Daniel R. Murphy
Daniel R. Murphy
Educating people for building wealth, adapting to a changing future and personal development.