It may seem strange to think about paying yourself first when you have a stack of bills waiting to be paid. But saving for your future takes precedence over other financial obligations. The concept has a host of financial and psychological benefits to offer.
You may be interested to know that Britain has one of the highest consumer debt levels in the world. Consumer debt includes mortgages, unsecured loans and property loans etc.
Here are 5 important reasons why you should consider paying yourself first:
Paying yourself first helps reduce wasteful expenditure
With consumerism at an all time high, there are temptations all around us. There are huge multinational corporations waiting to take a bite out of our hard-earned money at every corner. When you decide to pay yourself first, you spend less on other things and work towards building a secure financial future. Paying yourself first helps you save before spending.
Increased financial security
Credit Action, a UK based money education organisation said that in 2011, more than 1500 UK citizens were made redundant and about 100 properties were repossessed on a daily basis. (Repossession refers to a financial institution taking over a property due to non-payment of loans). Ideally, you should have at least 3 months’ salary saved up in the event of job loss.
Wealthy people always pay themselves first
If you read the autobiographies of wealthy people, you will find that all of them first paid themselves before putting their money into other ventures. It’s a good idea to emulate the habits of successful people.
Saving becomes a priority
As you get into the habit of paying yourself, you enjoy the rewarding experience of watching your money grow. As your money grows, so does your self-confidence. You are now aware that even in the event of job redundancy or business loss, you have savings to tide you over a difficult period.
Paying yourself first is equally important for business entrepreneurs
If you are a business entrepreneur, paying yourself a salary should come first on your priority list. This will encourage you to utilise the remaining money (and your valuable time) in the best way possible for your business. Prospective investors are more likely to invest in your business if they know that the business has healthy profits to show even after you pay yourself first.
Paying yourself first is a healthy financial habit that helps you build and enjoy savings so change the way you save (or start if you don’t already), and pay yourself first!