Equifax

Finance Blog

Money Management Tips: Pay Yourself First

Written by Equifax Experts on October 13, 2011 in Credit  |   No comments

In a world of options and a sea of change, making the best decisions on how to manage your savings can be a daunting task. You might decide that you need liquid savings for more immediate projects, responsibilities, and goals—but where there’s liquid, there must…

pay yourself firstIn a world of options and a sea of change, making the best decisions on how to manage your savings can be a daunting task. You might decide that you need liquid savings for more immediate projects, responsibilities, and goals—but where there’s liquid, there must also be solid. These money management tips balance your short-term goals with your long-term goals, such as planning for retirement, even if it is decades away.

Decide what you want and define your savings goals

Are a home, a car, an education, medical emergencies, elder care, or your retirement in your future? Managing your savings is very much like running a business. You need to define your short-term and long-term savings goals and come up with a strategic plan for getting them done.

You may have a big list, but don’t let the idea of managing your savings intimidate you. With the right information at hand, achieving your savings goals is within your grasp.
This is the first of a three-part series on managing your savings wisely. The series will help you develop a strategy for staying on top of your assets and maximizing your financial growth.

Part one: Pay yourself first

If you’re not going to look out for your assets, who will? The concept of paying yourself first works best when you make it automatic. Decide how much you want to save or invest each month. Then, let the bank automatically transfer money from your checking account into whatever savings or investment plan you choose. If you don’t have to think about it each month, this kind of forced savings will happen no matter how busy you get.

In David Bach’s best-selling money guide The Automatic Millionaire, he states, “When you earn a dollar, the first person you pay is you…put a minimum of 10 percent of your gross income into a pretax retirement account.”

Money experts agree that if you pay yourself first at the beginning of each month, as opposed to the end of the month when there’s not much left, you force savings. Let’s say at the beginning of next month you pull out $10 and put it in a savings account that you have earmarked for just that—savings. Little by little, you’ll be earning interest.

But where do you find the extra money to save? Bach identifies a simple thing called the “latte factor.” How much money do you spend on lattes and coffee—or some other little luxury—each day? How much of that could you use to pay yourself first? Examine the latte moments in your day-to-day life and you’re sure to find innocuous ways to save.

Quick tips for sock-away savings

  • Take it one day at a time. Gather up the loose change in your purse or pocket. Pull out all the singles. Skip the car wash. Each day, find one way to save even the smallest amount and it will add up.
  • Stash away reimbursement checks. The next time your employer pays you back for business expenses, put the money in a savings account and not your checking account, where you’re sure to spend it again.
  • Take a need/want reality check. Before you make your purchases, pause and ask yourself, “Do I need this or want this?” Skipping a want every now and then will rack up the savings over time.
  • Take an interest in your money. Shop around for the best interest rates on CDs and savings accounts. You may think 1 percent or 2 percent doesn’t matter much now, but over time these little figures add up.

Paying yourself first is a simple concept that anyone can do—if you start small. Once you make the process automatic, saving a little each month will become one of the best habits you’ve ever developed.

READ MORE:
Pay Off Debt and Take Advantage of Low Interest Rates
Identity Theft: What To Do If Your Wallet Is Lost Or Stolen
4 Tips for Savvy Yard Sale Shopping
Need Extra Cash? Host a Yard Sale
Lost Your Job? Here’s How to Manage Your Money and Protect Your Credit Score

No comments yet


Leave a Comment


Name :


Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.


Credit Archive

Stay Informed Sign up for our FREE Equifax email Newsletter