“Just for once in your life can’t you think of yourself instead of others for just one second?” I’m sure you’ve never heard those words said to you. Ever! Certainly, most of us never have problems thinking about ourselves. Whether it be the latest iPhone or those Hugo Boss jeans, pampering ourselves is priority number ONE! When it comes to paying bills we have no problems paying those too. Your landlord, your cellphone company, your local gym, etc… But have you considered yourself as a bill to pay? What if you thought of yourself as owing money to yourself? Would that change your thinking?
Paying yourself first is a concept that is introduced by David Chilton in the “Wealthy Barber”. This means you should be taking money from your paycheck and keeping it as savings before paying any of your bills. It may seem contrary to many people’s practices because they need that money to pay their bills at the end of the month; however, if you are budgeting and keeping track of your expenses, then paying yourself should be an expense and included in your budget as such. What does this mean? It might mean you have $100 or $200 less to spend each month, but what it also means is that you are putting your financial future first, and achieving financial independence takes some sacrifices. Hey… no one said it was going to be easy.
So how much do you save? Well, the Wealth Barber suggests you save 10% of your income. This may seem like a lot, and it may be a lot if you have a heavy debt load from school or credit cards, but the ten percent is a goal you want to strive for. If you are heavily in debt, then you will need to prioritize whether paying your debt is a larger priority or if saving is a larger priority. This topic will be expanded later on. Make yourself a goal, stick to it and start saving that amount. You will find that you won’t even miss that money you put away, once you have your budgeting done correctly.
So where does the money go? How do you go about doing this? There are many places this money can go. In Canada, there are many options to choose from including a TFSA, an RRSP, RESP or even just a regular high interest savings account. We’ll get into all of these financial instruments later on. The easiest solution is to set up a free, high interest savings account at your bank and have a set amount of money automatically transfer into the account at the beginning of every month. Make sure you cannot draw upon the account using your debit or credit cards. This way the money is safe. Protected from none other than yourself.
Once you are on your way to saving. The fun part is how to get that money in the savings account to work for you. Stay tuned!