Your Financial Future Is More Important Than Your Bills
You’ve heard this before “Always Pay Yourself First” but the execution isn’t always easy. The concept is brilliant and very important so let’s talk about it. Your paycheck probably comes every 2 weeks and though it may be variable there is definitely some sort of base-pay built into it. Before you think about any bills you should be paying yourself some money first. Whether it’s money you put into a savings account or into an investment account you should be investing in yourself and your future first.
When I first heard about this concept I’m like “Yea but I don’t wanna go to fucking jail for not paying my bills and get fondled in prison! Nor do I want to have late fees and a shitty credit score.” The concept is what’s important, the execution can of course be worked on. If you make this a habit it will translate into far greater success in the near future.
If you are in debt or have major financial goals in mind then you MUST have some sort of personal finance software. When I owned an auto-mechanic shop we had an expensive budgeting software, without it we couldn’t have run a profitable operation. So, I highly recommend you start with something, anything. Get on google sheets, do excel or even better starting YNAB-ing. I YNAB and am not ashamed to admit it.
In your software you will enter the amount of money that’s on your take-home paycheck. You will then subtract however much you are planning on putting away into savings/investments from that number (the money you are paying yourself). The rest you can assign to bills, entertainment or money you want to save to buy something.
So yea, if you are saving for a down payment for a home then that needs to be deducted after you pay yourself first. A home that you live in is almost always a consumable item. Unless you are running a prostitution ring or a meth lab out of it then it’s an item in your life that requires money to run without producing any income for you.
Back to the paycheck. I pick up extra shifts so my paycheck varies. However, at the very least I have $4,500 every 2 weeks coming in. In my YNAB software I enter the amount of the paycheck and then immediately the next line below that is my ‘Investment/Savings’ category and the one below that is ‘Emergency Fund’. I know that I need to save about $100k/yr from my take-home paycheck in order to reach my goals. That is somewhere around $8k/mo or $4k every 2 weeks. So, I put $2k in my savings and $2k in my investment categories and from there I start budgeting the rest of the $500 into my various categories.
In summary, if you don’t have a budgeting software you need to start one or pay the $5/mo for YNAB – best investment you’ll make. When you get your paycheck get into the habit of paying yourself first. Even if at first it’s only a few hundred dollars you will soon realize that you are worth much more than that. Don’t be a slave to your expenses, your future and your family’s is much more important than that. This habit will translate into you lowering your expenses, investing wisely and saving aggressively.
When I first started I would pay myself $1,000 from each paycheck. Middle of the month as the bills pile up I would have to take some money out from the savings category and put it towards clothing, transportation or gifts. I would constantly have to raid my categories… fucking annoying. But I stuck with it, I would watch the YNAB videos online and learned so much. I started working on my expenses, trimming them down. I remember my very first accomplishment was calling Farmer’s Insurance and telling them that I didn’t want to pay $1,800/year anymore for my car insurance because I got Geico for $630/yr.
Mind you, during this time my expenses were still in the $9,000/mo range. I’ve come a long way, hoping the same for you. My expenses now are closer to $2,000 per month. I set aside at least $9,000/mo from my paychecks and my medical group contributes another $5,000/mo on my behalf.
What are you using in terms of a budgeting method?
How much are you putting away from your paycheck every month?