CREATE WEALTH BY PAYING YOURSELF FIRST
I am an engineer/geek and I never liked traditional budgets. Instead I save money and grow my wealth by ALWAYS PAYING MYSELF FIRST! I am my most important debit.
BUDGETS – YAWN
Raise your hand if you love budgeting at home or work. That’s what I thought!
- Budgets sound great in theory but how many people do you know who have stuck with their budget.
- In a world where majority of us complain not enough time, budgets are time consuming, and typically in a few weeks (ok being honest- days) we GIVE UP!
- How many men want to tell their wife, “Honey I did not budget for ________.” How comfortable is your couch?
- Similar to the many weight loss diets I have tried, you get tired of budgets and dieting and give up!
Budgets do not work for MOST people. However, some people make remarkable progress utilizing a budget. If you like your budget, excel spreadsheet or app – you can keep your budget!
WHAT WORKS IF BUDGETING DOES NOT- AUTOMATE PAYING YOURSELF FIRST
You need to pay yourself first by automating your savings and investing plans. Sign up for your company’s 401K Plan or create your own retirement plan with a ROTH or Traditional IRA. Make it automatic so you never see the money. If you don’t see it you don’t spend it! See below previous blog showing other retirement plans:
RETIREMENT PLANS OTHER THAN THE 401-K, TO GENERATE > $1 MILLION PORTFOLIO!
WARREN BUFFETT, BILL GATES AND JEFF BEZOS, DID NOT BUDGET THEMSELVES TO A NET-WORTH >$300 BILLION
Warren Buffett, Bill Gates and Jeff Bezos, three very Americans with fortunes totaling > $300 BILLION, did not utilize a time consuming boring budget to become three of the richest men in the world.
PAYING YOURSELF FIRST
As a child when I earned or was gifted cash, I always put majority of the money into my bank savings account. When I started working part time and full time I continued this habit to ALWAYS PAY MYSELF FIRST. As a full time employee, I deposited, a percentage of my compensation into my 401K Plan and Savings Accounts, putting money aside for my future needs (emergencies, house down payments, rental property down payments, equity investments, Amanda’s college tuition, etc). What was left over from my paycheck, I would spend on needs and wants.
Years ago like many, I developed a beautiful, brilliant and stunning excel spreadsheet budget, complete with pivot tables (don’t ask-boring) and color charts (MAJOR GEEKISH). I detailed a budget for every thing (meals, rent, car payments, dating (a lot of that money was left over sadly), etc) but found myself constantly adjusting it. Plus as beautiful as that spreadsheet was – IT WAS BORING ME TO DEATH. I realized my tried and proven method of saving – PAY YOURSELF FIRST was easier. You pick a target percentage of income and save and then ensure your checking account does not run out of money until the next pay period. When extra money accumulated in my checking account, I would periodically transfer that to savings.
As long as you establish how much you need to save each month for retirement, your emergency fund and any other big, future purchases, and you actually set that amount aside, you DO NOT need to budget. You learn to live within your means. In addition, as my compensation increased, I always increased the amount going automatically to savings.
EXAMPLE – PAYING YOURSELF FIRST
PAYING YOURSELF FIRST – From your take home pay you put aside 15% into your 401K, and other savings accounts. What is deposited into your checking account, 85%, is what you live on until the next pay day. If you learn to live on your 85% you DO NOT NEED A BUDGET.
ONE LAST PIECE OF ADVICE: Leave your investments alone, when the market crashes. What goes down eventually comes back up, but 99.999% of us cannot time the market.
Think long-term and wait patiently for your portfolio to grow.
If you are a budget type – See Below:
9 Best Budget Apps for Personal Finance in 2018
For the rest of us, pick out the percentage you NEED to save and automate PAYING YOURSELF FIRST. Sit back and enjoy the amazing growth due to the magic of compound interest.
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I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger, with a NC State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.
I started my first business at ~13 years of age. I am a successful investor in equities and real estate and happy to share my personal finance and investment lessons learned with you. However, I am NOTa licensed financial advisor. Please do not construe my suggestions on this blog, as recommendations for your personal situation. For individual finance advice please seek your own licensed CPA or financial advisors.
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