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Wealthy People Pay Themselves First
by Hasani Pettirod
 

The forth habit of wealthy people is that they pay themselves first. Yes, it’s a simple concept. Unfortunately, only a few have truly mastered it. Wealthy people believe that “Paying Yourself First” is a layaway plan for the future. They are generally uncompromising regarding their savings and are unwilling to allow anything to interfere with their plan. They believe that the secret of financial success is to spend what you have left over after saving. Instead of saving what is left over after spending. An unknown millionaire once said, “It may sound crazy, but even if you are in debt, always pay yourself first.” While such thinking is considered common sense, it is uncommon to most Americans.

Wealthy people understand that wealth is measured by how much you keep, not how much you make. Meanwhile, poor and middle class people dream of and chase after a high-paying salary thinking that is the answer to their financial problems. They have undervalued the benefit of a consistent savings plan and the results are astounding.

Ninety-five out of 100 Americans don’t have $1,500 in a savings account and/or money market fund. In fact, 85 out of 100 people at age 65 are not worth $250. More 18 year-olds have $100 in the bank than 68 year-olds. Moreover, only 3% of all Americans save $400 or more a month. The 3% represent a small group of wealthy people. The remaining percent represent the poor and middle class.

Pay yourself first means just what it says. The next time you earn a dollar, before you pay anyone else any money they may have coming to them – before you pay the government taxes, before you pay your landlord the rent or your bank the monthly mortgage – you must pay yourself first. It’s simply good common sense. Before anyone else gets a claim to your money, pay yourself by putting a set amount aside in a savings or investment account. Most financial advisors encourage people to save 10% of their income. That’s a wonderful start. However, if you are able to put more away feel free to do so. Consider the following savings plan found in David Bach’s The Finish Rich Workbook:

To be poor:
Save nothing, or spend more than you make every month

To be middle class:
Save 5-10 percent of your gross income each month

To be upper-middle class:
Save 10-15 percent of your gross income each month

To be rich:
Save 15-20 percent of your gross income each month

To be super-rich fast:
Save 20 percent or more of your gross income each month.

If the savings path of the super-rich is not yet feasible, start with the middle class path and gradually work your way up. There are wealthy people who save up to 40% of their income. That takes discipline. Not only do they save consistently, they know how to allocate their money.

Wealthy people have mastered the art of consistently saving. Now it is your turn. Most people want what they see others have but aren’t willing to do what others did to get it. Remember, in order to be wealthy you must do what wealthy people do. So start now. Do not delay. Master the habit “Pay Yourself First.”

(556 words)

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