In a previous post, I mentioned one of my all-time favorite wealth building books, The Richest Man in Babylon (Author) George S. Clason. This book changed my perspective on my money habits. Speaking of habits, spending and saving are habits. Depending on what we were exposed to when growing up, spending and saving habits were adopted by our subconcious…that’s a whole other post and maybe we will explore that at a later time.
Today, however, let’s talk about the first wealth creation principle according to the book, Pay Yourself, First.
To begin with, paying yourself first doesn’t mean taking a portion of your check or income and spending it on that pair of Louboutin’s or a knock off of that Kardashian latest body-con dress. No, paying yourself first is about deducting a portion of your net income (or pre-tax income if you using a employer retirement plan) and making sure it is allocated for the sole purpose of wealth creation for your future. Never to be touched, until you retire. WHAT??? ARE YOU CRAZY?!!!
As a matter of fact, no, I’m not crazy…but, you are if you don’t follow this simple principle. Let me explain why.
Most people are accustomed to doing things this way: work, pay bills, take what’s left and spend it on our pleasures. Maybe, you take a little of what’s left and put it in a bank account, which is in today’s economy is equivalent to stuffing it in a mattress. Anyway, this habit never takes into account our financial future, only what our immediate needs are today. Well, what happens when we suddenly find ourselves at retirement age, and no money saved to live. There are few positive scenarios we could play out here, but let’s stick with the likely outcome of the average American. When we consider the change in our economic climate and the impending changes to our healthcare system, things don’t look too promising for the current elderly community, and even worse for the future elders.
So, it is paramount to start thinking about retirement, especially if you are at least 25 years old. If you’re older, and maybe already at retirement age, it’s not too late to implement accelerated cash reserve strategies. But, for now this topic of paying yourself first assumes you have a consistent income and you can start with the very next paycheck of creating the habit of paying yourself before you pay any bills of any kind.
Simply make the commitment to do it…no matter what…take 5, 10, or more, but at least 5% of your income and put it into a retirement plan/savings. Tax-deferred is good, but tax-free plans are better. I will again, discuss the differrence in a future post. To accelerate cash reserve growth, after you make the initial deduction, then pay your bills, and whatever is left, split it once again by taking 5% off that amount and putting it into your retirement plan. Whatever is left after that is for your pleasure! 🙂
It takes about 21 days to create a new habit, well since the average American doesn’t get paid daily, I am going to challenge you to take the next 21 paychecks or income and apply this principle. Whatever you decide is your number, deduct it right off the top of your net figure and place into your future.
All money has value, but not the value you think…Your money is worth a lot more tomorrow than it is today. So saving more of today’s money will create the wealth you are seeking tomorrow.
Here’s to your remarkable life & legacy…
The Legacy Creation Strategist™
P.S. — If you haven’t already, download your free copy of How to Easily Create Your Wealth Legacy & Live a Remarkable Life