Pay Yourself First - The Holy Grail of Personal Finance
Remember back to your first paycheck. The moment you opened the envelope anticipating the windfall when all your hard work pays off. Then, realty hits. Your takeaway earnings are almost always lower than what you expected.
Once the shock of taxes goes away, money management comes into play. Many times paychecks are spent before the money hits your account. If only at the moment of your first paycheck you had implemented the ‘holy grail’ of personal finance: pay yourself first. According to an article from Forbes, “only 23% of Americans have enough emergency savings to cover six months of expenses (the amount many advisers recommend for financial security should something unforeseen happen)—and 26% have no emergency savings at all.1”
Building the habit of paying yourself when you pay your bills could be the difference between uncertainty and financial stability. So what exactly does “pay yourself first” mean? Investopedia says, “‘Pay yourself first’ is a phrase popular in personal finance and retirement planning literature that means automatically routing a specified savings contribution from each paycheck at the time it is received. Because the savings contributions are automatically routed from each paycheck to your investment account, this process is considered to be paying yourself first; in other words, paying yourself before you begin paying your monthly living expenses and making discretionary purchases.2”
It’s never too late to establish these habits. You can use services available to you from your financial advisor instead of waiting for saving to feel like second nature. Consider putting as much as you can on autopilot from your paycheck to pay yourself first. One way to do this is to direct-deposit contributions to a retirement account before your paycheck goes to your checking account or setting up a transfer out of your bank account to your investment account earmarked for retirement or a specific savings goal.
*This content is developed from sources believed to be providing accurate information. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2022 Advisor Websites.