Pay Yourself First

DOLLAR$ and $EN$E, November 2009, by Brian Bogaert


Pay Yourself First


Brrrr, is it me or did it suddenly start to get REALLY cold outside?! Fall is here, ladies, and I bring that up as a lead-in to this issue’s Money topic. No, I haven’t switched to giving you a weather report…

The Squirrels Do It
We all know about the story of how the squirrels save up nuts for the winter if they want to survive. I’m here to point out how we do that in in our lives too. Remember last issue I was talking about ‘The Big Scary Recession’, a.k.a.: the economic downturn, that everyone was talking about, and are now saying is over? Well it works kind of like the way ‘seasons’ do.

Economic Patterns
Just like the seasons, economies have patterns too. And the last time a recession ended, there was a period where things started to look brighter. People became optimistic again and more were smiling than frowning. It was a lot like spring.

Then the good times REALLY started to roll. There was plenty of money to be made and people were living the good life – buying stuff, going on trips and woohoo, the fun seemed never ending… a lot like what summer can feel like.
 
Financially, it started to get a little chilly. There were signs that maybe the good times wouldn’t go on forever. Metaphorically speaking, fall had arrived and many people were caught out in the cold. They started scrambling like the squirrels, as the impending winter approached. Unfortunately, many didn’t gather enough nuts, er, money, and when the financial equivalent of winter came, they were left out in the cold so to speak, and lost LOTS and LOTS of money. Some even lost their homes and cars and jobs.

Prepare For Your Own Economy
Don’t panic, it doesn’t have to be this way. We can’t control the seasons but we do know that they change so we can think ahead and prepare for them! During the good economic times where money is plentiful we can learn to save and invest for the times when money could be scarce.

In my last article, I mentioned that you can create your own ‘economy’ (the economy is the financial state of a place or a person). So whether times are tough or easy as far as the economy is concerned, YOUR OWN economy can always be doing great. Spend money to enjoy your life, but be smart to always save too.

Time For an Example…
Many of you get money for Christmas/birthdays/allowance etc. What do you do with it? Most likely spend it, of course. Maybe you rush off to the Mall with your gift cards and cash and shop till you have no money left. And oh what fun! You spent it all at one time with very little thought of the future. Your ‘economy’ is: Spend, spend, spend and when there isn’t any left, you just assume or expect more will just show up. But sometimes it doesn’t.

Honestly, the real fun of shopping is being with your friends, trying on clothes, hanging out and being silly… you don’t always have to buy stuff to have fun!

Pay Yourself First
What if you put 1/3 of any money you ever get into a savings account? Try it for a few months and you won’t even miss it, that much. You will find that you have money left over for things that come up later on. Make a rule that whatever money you get, you will put some away. And by the way – savings doesn’t mean ‘money to spend next week’. Savings is meant to stay put for a while. If you divide your dough in thirds, you could do this: the first 1/3 is money you spend on anything you like (junk food, etc), the second 1/3 is for ‘short term savings’ (money you save up to go to the movies, buy clothes or higher priced items), and your final 1/3 is ‘long term savings’ (money you keep in your savings account for emergencies, investing in your future, going away to university and so on).

This works great when you get your first job! Divide every paycheque into thirds and deposit the long term savings portion into your Bank Account. ESPECIALLY while you’re living at home and don’t have rent and food to pay for! Put as much money away as possible while you can!!!

Shop Wisely
Then when you buy things, don’t get THE most expensive thing you can afford. If you know you can afford exactly $75 for jeans – buy the ones that are $50 and put the other $25 away or use it to get something else (more for your money). In a month, no one, not even you, will care that those aren’t THE most expensive jeans – and they’ll probably be on sale by then anyway. You’ll love having extra money when you need it (while some of your friends are broke at home eating microwave popcorn and watching reruns of Zack and Cody).

Money Tip #12
Whenever you get money, always save some of it! (Don’t spend more just because you have it.) Always put some aside and never spend more than you have.

See my Article in April 2008: Make Money While You Sleep to find out how to get that money you saved making you even MORE money without having to WORK for it!!

YOUR Economy
Make this a habit and you will avoid the desperate times so many adults have experienced over the past couple of years. YOUR ‘economy’ will now be: I always have money – through every financial season!

And if you want to read a great book about Paying Yourself First, look up 'The Wealthy Barber', by David Chilton.

~ Brian


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