Paying yourself first?

Discussion in Retirement Plans started by Lostvalleyguy • Mar 28, 2014.

  1. Lostvalleyguy

    LostvalleyguyActive Member

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    This is a comment that comes from a book called: The Wealthy Barber. It is a good read for those of you who are looking at saving money for retirement or are young and just want to save up some money. I would think that a copy would be available in many libraries.

    The basic idea is to take a percentage of your income (10%) and put it aside immediately. Have it in a separate account and do not make it easy to access. If it isn't in your everyday spending accounts, you will be less likely to spend the money. It will grow to a sizable amount in a short period of time. Once you get used to it, you will learn to live without that money and not miss it.

    Do you pay yourself first?
     
  2. Denis Hard

    Denis HardWell-Known Member

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    That's definitely a great way to save money. I save slightly more than 10% of what I earn but because the money is not in a separate account, I normally end up spending it as well if the urge to buy something which may not be needed at the time strikes.

    I think having a separate account for your 'real' savings which you don't touch no matter what, could help most people save a substantial amount of money which they can then invest when the time is right or when they've saved enough.

    p.s Starting the end of this month, I'm going to start saving some of my money like this.
     
  3. Galadriel

    GaladrielNew Member

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    I've heard of people doing this, and think it sounds like a great idea. I have recently started going "budget crazy," this year since my finances are much stricter than in the past. I'm going to try the 10% rule, and see where it takes me! Although, I have a feeling that 10% will immediately go into paying my student loans once those bills start coming...
     
  4. Quaestor

    QuaestorMember

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    Definitely.

    There are several reasons for doing this - the main one is having an emergency stash, usually 2-6 months' worth of living expenses saved in cash. That way if something unexpected happens, like an illness or loss of employment, you don't into debt and can continue as normal for those months, while you get back on your feet.
     
  5. Oakster

    OaksterActive Member

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    I've read about this concept before, you basically look at your savings account as if it were another expense you can't avoid.
    I think this is a great idea and it probably works, I'm thinking about setting up my accounts so that it automatically transfers a set amount every month automatically to the savings account.
     
  6. Richiee

    RichieeNew Member

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    Yes I do pay myself first.

    But I follow a different principle. Instead of saving 10% per month automatically, I follow the 70/30 rule. Instead of just saving 10% a month, I save 70% of my income instead which may seem impossible but I'm able to pull it off month after month. Since I am forced to work with only 30% of my income, I was able to channel my energy and brainpower on developing new sources of income, while also finding different ways to minimize my expenses.

    I learned that method from Robert Kiyosaki's Rich Dad, Poor Dad. And I recommend that you guys read it if you still haven't. It's a very helpful book that tackles the basic forms of personal finance. :)