Pay Yourself First - The Holy Grail of Personal FinanceSubmitted by B. Cox Planning on February 27th, 2018
Remember way back to your first paycheck. The moment you open the envelope anticipating the windfall when all your hard work pays off. Then, like a swift kick to your gut, realty hits. Your takeaway earnings are almost always way lower than what you expected.
Once the shock and horror of taxes goes away, money management comes into play. Most of the time these days, paychecks are spent before the money hits your account. What if at the moment of your first paycheck you had implemented the ‘holy grail’ of personal finance, pay yourself first. According to a recent article from Forbes, “only 23% of Americans have enough emergency savings to cover six months of expenses (the amount many advisers recommend for financial security should something unforeseen happen)—and 26% have no emergency savings at all.1”
Building the habit of paying yourself when you pay your bills could be the difference between uncertainty and financial stability. So what exactly does pay yourself first mean? Investopedia says, “‘Pay yourself first’ is a phrase popular in personal finance that means you automatically direct the amount you want to save from each paycheck at the time it is received. Because the savings contributions are automatically redirected from each paycheck to your investment or savings account, this process is considered paying yourself first. In other words, you are paying yourself before you begin paying your monthly living expenses and making discretionary purchases.2”
It’s never too late to establish these habits!! Use the services available to you right now from your local bank, credit union or online savings provider. It's easy in most cases takes about 5 minutes. Consider putting as much as you can on autopilot. You may be able to automate directly through your paycheck to pay yourself first. Forbes suggests, “direct-depositing contributions to a savings or retirement account before that money hits your checking account. And if your employer allows for multiple automated transfers, you can also have a set amount transferred into emergency savings or another account earmarked for a specific savings goal.3”
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2014-2018 Advisor Websites.