Do you remember receiving your first paycheck? I do. It was a thrilling moment, until I opened the envelope. What happened to all my money? The numbers did not match what I calculated in my mind. Then I saw the deductions. Some I could identify, others, such as FICA, were a mystery. Over the summer, however, I found I could still go out with friends, buy some clothes, and even a radio.
Adapting- Many of us have similar stories. While not happy to pay taxes, we adjusted to the situation. We based our spending on net income rather than gross income. At first, it was uncomfortable, then it became a habit, then it became second nature. We may discuss salary based on gross pay, but we automatically think in terms of net pay when planning our expenses. Unfortunately, we form a spending habit all too easily, and do not realize we can use this habit-forming ability to our advantage.
Is it really yours?- How much of your money is yours to keep? If you answered, “All of it,” you may want to reconsider. We already know some of this money goes to taxes. You may have earned it, but it is not yours to keep. Do you pay rent or a mortgage? Once you make the decision where to live, the money you pay each month is no longer yours. It now “belongs” to someone else. Do you have a car payment? If so, that money belongs elsewhere. Do you have credit card debt? Do you buy groceries? So, how do you make it YOUR money?
Get started- Would you pay someone who did good work for you? Of course, you would. Each time you receive a paycheck, before you pay anyone else, are you paying the one person that works the hardest for you, namely yourself, first? You should, you deserve it.
The first step is to develop a realistic, common sense spending plan. Try to avoid extremes or you will not stick to the plan. The goal is not to deny yourself the basic comforts you appreciate in order to save every dime. Just make sure part of this plan includes paying yourself first.
Once you put a sensible spending plan in place, set some goals. That means making regular payments to yourself as if it was a bill you were required to pay. Establishing the habit of paying yourself first is more important than the amount. This way, you can begin to save or invest for the future.
One last word- Some folks believe it may be too late for them and decide to develop the habit in their kids. First, it is never too late to start. Second, children generally will not do what they are told, but emulate what they see. Therefore, starting with you now will have two benefits. First, you will accumulate money. Second, you will start your kids off right.
It all comes down to choices and habits. You can choose to keep your habit of not paying yourself first, or choose to change your habit and pay your best employee first, regardless how small the starting wage may be.
The difference will truly be YOUR money!