Money Strategies for the Fiscally Confused

Simple Strategies You Can Use to Jack Up Your Net Worth

Sunday, February 26, 2006

Pay Yourself First

The easiest way to keep what you make is to pay yourself first. Paying yourself first means that every month before you pay the rent, the car loan, the credit card bill, or the Banana Republic charge card, deposit a set amount of money into a savings account that you absolutely won't touch.

Again, I suggest looking at your personal finances as your own business. Saving (that set amount of money you pay yourself each month) should be viewed just like all of your other bills. The only difference is that it should always be the first one you pay.

If you are a historically bad saver, don't resolve to pay yourself more than is reasonable. Otherwise, you won't stick to the program. Try paying yourself $50/month until it becomes a habit. Then, evaluate your progress and bump up the amount to $100 or $150. Doesn't sound like much? Don't think it would ever make you wealthy? Well, $150 saved per month, returning 10% per year for 25 years (including 25% federal taxes and 4.5% state taxes) equals a windfall of $149,084. Not too bad for some pain-free, disciplined savings...

So the keys to paying yourself first are to: a) start now, b) save a reasonable amount; don't do more than you can handle, and c) be consistent.

What are you waiting for?


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