If you’re like most women, you’ve had the best intentions to put away money for a home, retirement or something else. But before you know it, months or even years have slipped by and you’re no where near your savings goals. It’s probably because by the time you’ve paid for the necessities – mortgage, groceries, children’s activities – you’re left with a few dollars and think why bother?
As an investment coach to women, I hear this all the time. So here’s my golden rule: Pay Yourself First. No, it’s not spending money on yourself. But it’s the easiest, stress-free way to help you invest in your future.
Pay yourself first is a system where you automatically set aside and direct savings for your retirement, emergency fund, and any important savings goals from your paycheque before you pay for monthly living expenses. When you wait to see what’s leftover for savings after expenses, you’re paying yourself last. Isn’t it time you put yourself first?
Why Pay Yourself First?
- You prioritise saving: You are telling yourself that you and your family’s future and security comes before anything else
- You develop great financial habits: It takes a conscious effort to save for the future but once you start and see how quickly your wealth grows, you’ll be hooked.
- You’ll be prepared for the unexpected: Life happens and there may be a time where you’ll need to dip into your savings. You’ll be thankful you had a buffer and didn’t let a setback derail your goals.
How to Get Started
I’ve found the best way to make paying yourself first effortless is by setting up a method where the money you save is invisible. When you don’t see it, you don’t miss it and you adjust to a not having the extra amount very quickly. Arrange for a percentage (ideally 10-20%) to be automatically deducted from your biweekly or monthly paycheque and deposited to either a separate savings account or investment account.
I’d suggest that you separate funds for short, medium and long-term goals. You’ll want funds allocated for your short-term needs (i.e. an emergency or trip) in something liquid so it can be easily withdrawn like a high-interest savings account or money market fund. Conversely, funds for long-term goals ideally should be in a diversified investment portfolio so you have the best option to grow your wealth (across stocks, bonds and other asset classes).
Also, your company or government may offer a retirement savings plan where you contribute and some or all of that contribution is matched by your employer. It’s an excellent way to save and it’s free money!
I’ve set up the pay yourself first system at various stages in my life. Every time I look at my investment and bank balance I’m so happy I started the habit early. I’ve never met anyone who regrets not saving. I have met hundreds who regret not saving earlier.
How do you feel about paying yourself first? If you do it, how has it worked? Share your thoughts and send me an email.