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The Art of Paying Yourself First

If you’re like most Americans, you’ve probably had the following conversation with yourself, “I’ll begin putting some serious money away just as soon as I get my debt paid off and I have some extra cash on hand.”  Sound familiar? Sure it does, especially if you’re struggling to pay the bills.
But isn’t it funny how the debt never seems to go away and the “extra cash” is never on hand?  You can’t possibly be expected to put money in savings under those conditions, right?  Well, you can’t if you believe the notion that “saving” is something you do after everything else has been taken care of or if you have “extra” cash.  As Alan recently noted in his January 2 blog, What is the “Savings: Emergency” Category in a Spending Plan?, paying yourself now for emergencies is more important than putting money in a 401(k) or paying extra on debt.
Many people think “saving” is something only the wealthy can do because they have lots of extra money lying about.  But most of America’s affluent were not born with silver spoons in their mouths.  According to the book The Millionaire Next Door, eight out of 10 wealthy Americans accumulated their riches themselves 1207and they were largely able to do so because they learned early on the art of paying themselves first. As George Clason teaches in his book The Richest Man in Babylon, the rich get wealthy and stay wealthy because they have learned how to keep a part of all they earn for themselves.  Before a wise man pays his creditors, before he buys goods and services, before he indulges his children, he pays himself first.
How  does a person learn such an art?  It may seem hard when debt is looming, but it’s easier to apply than you might think.
First, you must change the way you look at the idea of “savings.” I love what the Money Mastery program teaches, in that there is really no such thing as “savings.”  Savings is actually just “delayed spending,” because after all, all money will be spent, either now or later.  If you begin to look at savings in this way, you will realize that saving is not a special thing that you do “if you have enough extra money left over” but a monthly obligation you must pay to yourself, just as you would pay any other debt you owe.  Since savings is a form of “spending,” you must treat it as seriously as you would any other kind of spending.
Second, you must track your money carefully so you can see where you are wasting money.   When one of Alan’s coaching clients began tracking their spending, they discovered, that they were wasting $187 a month on junk food.  How much money will you find you’re wasting when you begin seriously tracking your spending?  We can guarantee it will be at least 1 percent of your monthly income.
Step 1:  Set up categories for spending for such things as groceries, transportation, and debt in a Spending Plan.  Be sure to create a category for “self pay” or “savings.”
Step 2:  As you track your spending look for wasted  or “found” money. Virtually everyone finds at least $150 they are not using efficiently each month.
Step 3:  Before you make a debt payment or buy food or other items, deposit this “found” money in your “self pay” or “savings” account.  Anybody can find at least 1 percent they can set aside immediately.
If you do this, you will begin to feel very empowered. Savings is an amazing emotional tool for happiness and well being. Start learning today the art of paying yourself first.

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