by Altaf Sahibzada

Created on: January 02, 2008

Passport to Wealth Pay Yourself First

Much has been written on this strategy of building wealth. There is almost unanimous agreement that paying yourself first is an easy way of getting rich. Besides saving money, another important aspect where this principle is applied is in time management.

"Pay Yourself First" means that when you receive a pay check, you should take out a portion of the same and put aside as savings.

Government usually has the first charge on incomes. Only after it gets paid, the balance is disbursed to the payee. Normally when a person receives a pay check, he pays his monthly bills first. These include rent or mortgage payments, credit lines, utility bills, credit card payments, student loans, car loans etc.

The strategy of paying yourself first means that before you make any payment on your monthly bills, you should deduct a portion between 5 and 15 per cent of your paycheck and add to your savings. This should be considered as a compulsory charge in order to be successful. Though generally 10 to 15 per cent of the purchase price is preferred to be set aside before making any other payment, one can always adjust it upwards after meeting all the monthly expenses and if one feels comfortable with a higher level.

After paying yourself first, you will pay other monthly bills. One may not feel comfortable with the above notion and may always be worried about paying the bills. But consider a situation that in case monthly bills like gas, hydro or taxes go up as they have been, one has no choice but to pay. Therefore consider pay yourself first as a new compulsory charge.

One may not feel comfortable with the above notion for some time, but one will tend to adjust with over time. After experiencing its benefits one may actually feel exhorted to save even more. As Robert Kiyosaki in his "Rich Dad, Poor Dad", has also mentioned that if you have more expenses than income, you tend to explore additional ways of making more money. It has been seen that when one is under pressure to meet living expenses, one tries to find more ways of making money.

In order to be successful with the above principle, one should also follow the following guidelines.

Automate monthly withdrawals from your bank account into your savings account.
Invest wisely. It is not enough only to save, but also to invest those savings judiciously with more than average rate of growth and appropriate financial planning.
Always pay all of your bills in time. Never carry forward any balances on your bills or credit card payments. They not involve large payments latter on but may also ruin one's credit score.
Avoid all credit card debts, car and equity loans.
Adjust your standard of living and monthly bills in the leftover balance. Never spend more than what you earn.

Paying yourself first is one of several most important ways of getting rich. It needs a resolve and determination to stick to the same. The benefits will come slowly and steadily. There is enough evidence which suggests that this principle is known to work best in the science of getting rich arena.

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