Pay Yourself First!
Why pay yourself first? If you interviewed 100 financial wizards and asked them for their list of steps to financial freedom, what you would get is a list of steps, some with 9 steps, some 10, some 12, all with one common denominator. Each wizard would have the following step on their list and probably in the first position. Pay Yourself 1st!Think about this for one minute. Every single month you pay a seemingly growing list of entities a small share of your sweat and equity and your own name is nowhere to be found on the aforementioned list of entities. What's wrong with this picture? You need to be on the list and more importantly, you need to be on the top of the list! Every book on Finance teaches you how important it is to pay yourself first.This is the first step: pay yourself first. The generally accepted amount here is 10% (pretax), so if you earn $50,000.00 per year you should plan on saving about $5,000.00 per year and that could be divided amongst several saving vehicles like a 401k, IRA, Roth IRA & savings account etc. We will talk more about retirement vehicles in the section titled “Retirement Concepts” and in the "Investment Guide". When deciding how to allocate that money across the various saving vehicles, the first thing you need to look at is if your company has a 401k match. If they do, you want to max this out. This is Free Money!Do not pass this up. Say your company will match 25 cents on the dollar up to $2,000.00. If you max this out, you will be picking up $500.00. So after year 1, your account will have $2,500.00 (not including any gains or losses)...the $2,000.00 you put in and the $500.00 from the company match. You then have to decide where to place the remaining $3,000.00 of your annual “payment to yourself”. If it were me, I would place another $2,000.00 in an IRA and the final $1,000.00 in a money market account. Once this money is inside these accounts, it has to be invested in something and we will talk about that in the section titled “Investment Guide”.
Don't just take my word for it. If you want to see what others have to say about this topic, try Google Search!
Go to 9 Steps to Financial Freedom from Pay Yourself First
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