Pay Yourself First!

Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like.”— Will Rogers

If you live for having it all, what you have will never be enough.

Christmas and New Year’ Eve  are around the corner. The malls are decked out, with  fantastic slogans all about ‘put the smile back on her face’, ‘show them you care’, ‘those whom you treasure close to your heart, crystallize your tender emotions for someone you love with a priceless gift that will be treasured forever’. Add to this the never to be missed the rock bottom sales. Message spend, spend, spend!

Loads of money spent on gifts that few appreciate! Christmas and New Year bashes that last few hours and cost a fortune, all in the name of tradition and keeping up appearances! Many will happily spend a fortune on one night. Can’t we find a better use for this our hard-earned money? Can we have our cake and eat it too? 

This festive season, be different! Do something that has a long-term value. Pay Yourself First! 

This is one of those concepts that strike a lot of people as sounding great in principle but having very little application in real lives. And I wouldn’t be surprised at all if, right know, you are thinking: “Sure, I’d love to pay myself first, just tell me where I’m going to get the money from.”  Well, I’ll let you in on a secret:  you already have it.  That’s right.  

By definition, saving – for anything – requires us not to get things now so we can get bigger ones later on. No matter how much or how little you earn you always make enough money to pay yourself first. The problem, and it’s not just your problem, it’s almost everyone’s problem, it’s not that you don’t make enough. It’s that you spend too much. 

“What good it will do to put aside just a small part of your income to begin with, when your goal, or your dream would require massive capital!” is what you may think. Ever heard the saying “little drops of water make mighty ocean”? Even if you have what seems to be a modest income, the amount of money that will pass through your hands in your lifetime is truly phenomenal. 

I run into this during my seminars. Many people tell me they know my “idea” of contributing a portion of their income to a savings plan makes sense, but they just can’t see how they could possibly manage if their income (what they mean is spending) is suddenly reduced by 10%.

Recently, a single mom challenged my assertion, that it was possible “To give yourself a pay-cut.” She said very agitatedly: “I don’t think you are in touch with reality.”  “Many of us here today are in our mid-thirties and forties. We have to meet many expenses and live from salary to salary and while we are doing that, we can’t take a 10% pay-cut. It is simply impossible”.

A murmur of agreement rippled across the room. Clearly, many of this person’s associates shared her fears. Justified or not, these fears need to be addressed. 

“What would you do,” I asked the lady, “if your boss came into your office tomorrow and told you that because of a corporate restructuring, you would lose your job, or you could stay but take a 10% pay cut in salary”?

She looked startled, then stared at her feet and mumbled, “ I’d take the 10% pay cut.”  “And how would that effect you? Would it make you so depressed that you can’t get out of bed every morning?” The lady looked at me a little strangely and said, “ of course not, I’d be disappointed, but I’d still get up in the morning and go to work.”

 “ Good”, I responded, “so we know that being forced to take a 10% pay cut wouldn’t incapacitate you. Would you lose your home if you got a 10% pay cut?”

 “No”, came the irritated answer, “I would figure out a way to cut back.”

I told her that was good too. “We have established that a pay cut would neither incapacitate you or leave you homeless.”

The point of my questions was not to make fun of her or anyone else’s concerns, but to show everyone in the room that there are really two options in life:  you can either be reactive or proactive to circumstances. It’s a lot more fun to be proactive-to make decisions about your life before events take control of you. 

No more excuses. When I pay my loan off, when I get my next raise, after I go on vacation, at New Year’s, the festive season is in full swing, business is slow, etc.

 What makes us procrastinate about saving? Most of us do it for one reason: fear of change, because we associate change with pain. Saving means reducing our spending. Reducing our spending means changing (however slightly) the way we live. And changing (however slightly) the way we live means…who knows what? Probably something terrible?

Focus on this one lucrative habit! Pay Yourself First! You will only see your money grow.

Merry Christmas and a Happy New Year!

By, Sandi Saksena, Financial Advisor & Empowerment Mentor.

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