Why It’s Important To Pay Yourself First
What’s the first bill you pay every month? Is it your rent or mortgage? Perhaps it’s your cable or telephone.
If you want to be smart with your money, they very first bill you should pay is to yourself. Yes, even if you are in debt. Even if you are just barely making ends meet. You NEED to pay yourself, before you pay anyone else.
Why is it so important to pay yourself first?
That’s easy – to protect yourself. You need to put some money away for your future… or your future won’t be very bright.
I know that I want to retire when I have a bunch of money stashed away – enough that I could live on until the day I die (and then some… just in case).
When times are tough (and trust me, I know what that is like), it can be difficult to even think about saving money for your future.
Many people believe that paying off debt is more important than saving for retirement – and while I agree that it is very important to live a debt-free life, I also strongly believe in saving for your future. No one else is going to save for you, so you have to do it yourself. If you are in debt, I would suggest putting more money toward debt than savings. Once your debt is paid off, you can then ramp up your savings.
Don’t put off saving for retirement.
The earlier you start to save money, the easier it will be for you to get into the habit of paying yourself first.
You need to pay yourself before you pay any other bills. This includes groceries, utility bills, car insurance. Everything. You and your family are more important than your landlord. More important than the cable company. Pay YOURSELF before anyone else gets a single cent of your money.
The following are some easy ways to pay yourself first, without much effort.
– Automatic Withdrawal. Have your bank set up an automatic withdrawal so that every month (or week) you will have a certain amount of cash sent from your chequing account to a savings account of your choice.
– Paycheque Deduction. Many employers will allow you to set up a form of paycheque deduction, where a portion of your paycheck will go directly into your savings account. This is a great way to save, because you never even see the money hit your chequing account (so you don’t have to worry about spending it!).
If you haven’t already started paying yourself first, start now. Even something as little as $5 a week will add up to $240 by the end of the year.
Remember that you are the most important thing. Give yourself the best future possible by paying yourself first.
we pay all of our bills first.
we put A LOT toward my hub’s truck. we always pay off our vehicles within 1 year of having them. we pay $161.90 every two weeks (that’s automatic payments.) and we try to put $700 extra toward his truck a month.
our credit card is at 175$. so we don’t worry about putting much toward it, maybe $25 here and there.
we put $100 a month toward our child’s savings account.
we try to put 25-30% of our check into savings each month for us. but that’s only if it’s a good pay day and we aren’t in the hole with the credit card, or paying bills.
we have a retirement plan set up where 10% of our pay goes into it. it’s a military retirement plan. we are going to change it to the roth plan with army offers in 2012. therefore, we won’t have to pay a bunch of taxes when we do retire and take it out. with a roth, taxes are already taken out, so you don’t have to worry about a big chunk being taken out when you do retire.
now that i exposed our finances, do you have any recommendations/advice for lowering bills?
we recently moved to decrease our rent by $355 and gas by $350. but, cell phone bill, cable, and net, are kind of out of control.
wish i could coupon like you do, girl. send some of that stuff my way 😉
Bundle your services if you can and if not call and threaten to cancel your cable and see if they will lower your bill. I got mine lowered to $5 more then just the internet on its own when I called Shaw to cancel it. I am just not in a place where I can justify spending that extra money on cable EVERY month and there really is NOTHING on TV I watch or NEED to watch so I was willing to take the chance and if they weren’t going to lower it I was just going to keep my internet service so when they offered it for $5 more I was a happy camper 🙂 Give it a try and see what they say 🙂
I agree Cassie, it just doesn’t get done otherwise!
We take a bit of a different approach in that we pay our tithe first. It’s all God’s anyhow. I do realize not everyone shares this outlook, but we have had amazing things happen financially (and I don’t mean windfalls of money!) and fully attribute it to God.
That priority taken care of, we have always had “hidden savings”. Up until a year ago, that was company stocks, but since dh’s company was bought out, we have taken that same amount and automatically put it in TFSAs-around 10% of our income. This is our “ready cash” as well as our savings vehicle. DH has been at his company for over 30 years so will have defined benefits when the time comes (monthly cheque) so we really don’t need a “retirement” fund as per our financial advisor, but we do have some. I realize this isn’t the case now and we would have a designated amount going toward that if we needed to.
Our mortgage has been paid off for ages (had a large downpayment, paid weekly, and always put 10% down each year) and we save for everthing. Haven’t had a car payment in 22 of our 24.5 years of marriage! We save, then buy what we can afford (often using the stock money, tax refunds or the occasional work bonus-though that is never promised). When we redid our kitchen/family room 4 years ago, we paid cash. For us-save 5 years and pay cash or finance 5 years and pay interest…we opted for the former.
We use a credit card for everything but NEVER carry a balance. EVER. They pay me for the privilege of using the card, not the other way around!
Our vehicles are 93, 98, 01, 01..yes we have 4 on the go at present. But that took a lot of thought and consideration, was the insurance worth it? but living in the boonies, not on a bus route, we knew this would one day be an issue. If we couldn’t have comfortably worked it into the budget, I would have been chauffeuring a lot or sitting home without a vehicle. Since our kid’s education so far has been fully funded by RESP from grandparents, this is what we could do for them-cover transportation costs until they are done school. It is nice now that dd bought one vehicle from us and covers her own insurance and expenses…but we still have a 20 yr old male to cover!!! We don’t even consider a new vehicle until we absolutely need one. I love my 93 Previa and it still runs just fine and hasn’t a spot of rust on it…and saves considerably in insurance with a 20 yr old!!! I’ll be driving it until ds takes over his own transportation costs to be sure.
We have also done without until we could comfortably afford it-a hard concept for many. We got basic cell phones when our first child started driving alone, really for our comfort and because we could afford it. Then we added a 4th phone when second child was driving. If we couldn’t, we wouldn’t have-it is NOT a necessity! DD has a blackberry but she now pays her own bill. Ds has a bit fancier phone, but he bought his own-not a smartphone because he didn’t want to pay for the extra as we would only cover the basic family plan! Dh and I were thrilled when we renewed the contract 2.5 yrs ago and could get phones with qwerty keyboards so we can actually text the kids. We would have no cable and dial up internet if that is all we could afford…as it is we have more than basic cable, but not by much! Again, only upped that when we could afford it. We are behind most people we know when it comes to adding those luxuries!
I also think it is the little things that kill the budget…we don’t eat out much, and if we do it’s to grab food at a drive through, no drinks. Once a week tops, and even then I cringe when I add that up! We are basically home-bodies so that saves on gas and entertainment costs! We don’t spend much on clothes at all, and often ask for clothes for Christmas or birthdays.
I can’t really say that couponing has lowered our household budget THAT much as I have always been a loss-leader sale shopper and have had a huge stockpile in the basement. Couponing has mostly increased what I have donated lately! Without adding up a whole lot of receipts, I have no clue how much I spend per month on groceries, etc as a month could easily go by without me shopping!
In the midst of all this, we have managed to take an almost yearly trip to Walt Disney World since 1997-basically our only extravagance-but done on the cheap without any extras, but it has been wonderful family time that we have sacrificed to make happen. Again, if we didn’t have the money, we wouldn’t have gone…sadly, now that we don’t have to think quite as hard about the funds, the kids are busy with school or work and can’t get away!
Not sure if any of that helps you Jess, I guess I wrote my own novel too! One big thing is to make sure housing and transportation costs are in line (recommended at approx. 30% and 15% of your income tops) Perhaps keep track of every penny you spend for a few months (without changing any habits) to see exactly where your money goes-potentially very eye-opening!
jess – Wow, I am very impressed on how much you put toward your hubby’s truck! That is mighty impressive. Good for you! Sounds like you have your savings and debt repayment in order, so that’s great to hear.
As for lowering your bills, it really depends on WHICH bills you are trying to lower. I’d suggest checking out my “how to save money” page for lots of tips:
Amanda – I do the whole “threaten to cancel cable” thing once or twice a year. Works every time. 😀
teachermum – If you believe that God comes before you and your family, then by all means, pay God first. We all have our own beliefs, so do what’s right for you. 🙂
You are totally one of my idols when it comes to finances. You and your family seem very smart when it comes to saving and spending wisely. I am learning from you!
We also put everything on our credit cards, but never carry a balance. I love getting paid to use our cards!
I can’t believe you go to Disney World almost every year, that’s incredible! My hubby would love if we could do that (okay, and I would love it too!).
Thanks for sharing your story and tips!
Thanks Cassie, we have been blessed that without even really discussing it (not something I’d recommend!), dh and I were on the same page financially. I know money trouble is the most common cause of marriage trouble, and I can believe it looking around at those we know. Such an overwhelming stress to not be in agreement and have a plan to execute it.
As well, being debt free has made our lives SO much easier. Imagine if you had no mortgage, car or debt payments, how freeing that would be! Sure gives you a lot of money to play with, and by that I mean PLAN with! We are in control, not the “other stuff”!!!
If our experience can be of any help, I’m always glad to share and/or answer any questions.
teachermum – I totally agree that money is the most common cause of finacial hardship. Couples should talk about their finances before they even get married, to make sure they both have the same beliefs toward money.