Why Pay Yourself First
Posted 06 Jun 2014 by Natalie LeBlanc
All too often we allocate our “saving” dollars to whatever happens to be leftover at the end of the month. But is that really saving?
It can certainly be easier to let the chips fall where they may: pay the bills, buy that new gadget that everyone is talking about, and then save whatever is leftover. But what is your money really doing for you this way? You are investing in short term satisfaction first, rather than long-term financial security.
Another way of looking at it is by asking yourself, “What are my financially-dependent priorities?” Many people would likely list things like retirement, buying a house, buying a car, or traveling; all very expensive endeavors. (Unless you would like to sail the world in your fishing boat!) If you “Pay Yourself First,” or allocate a portion of your income to your savings before heading to Mic Mac Mall or to Bayer’s Lake Shopping Centre, you are guaranteeing yourself a bit more financial stability in the future. You are working toward your financial goals by giving them priority over fleeting, short-term wants.
Paying yourself first has more benefits than simply the knowledge and satisfaction of moving towards your financial goals. It builds sound financial habits around saving which, if continually exercised, provides more security in the future should the need arise for some quick emergency cash.
When you decide to save in this manner, the amount you have doesn’t have to be grossly large. If you start with just 5% of your income, in a year’s time you will certainly have more than if you didn’t save at all, and for a small fraction of your paycheck. Developing this habit and seeing your savings balance grow can be quite the motivation to up the ante down the road, and in return increase your savings balance even more so.
So what is more important to you: your financially secure future self, or that extra $200 in your bank account?