Pay Yourself First

Most people make sure they have enough money to pay their bills – the mortgage, car, telephone, credit card, and other payments – each month.

However, they often forget to write the most important check. Whether you are a teacher, a professional athlete, a student, or a business owner, the name on the first check you write each month should be your own.

It has been said many times: It’s not how much you make that matters; it’s how much you save. The key to saving is having a plan. Know how much you need to save for retirement, and then pay yourself each month. By setting up a monthly transfer from your checking account to your retirement account, you can automate the process.

If you think you cannot afford to save, consider this idea, offered by best-selling author David Bach. It is called the Latte Factor^TM.[i] You cut out small expenses and use that money to pay yourself. For example, by toting your own coffee and snack each morning, instead of going to the local coffee shop for a latte and a muffin, you can save about $5.00 a day. Over a week, that’s $35.00. If you earn a hypothetical annual return of 5 percent, your savings can grow fairly quickly:

• 1 year      =  $1,842
• 2 years    =  $3,778
• 5 years    =  $10,201
• 10 years  =  $23,292
• 15 years  =  $40,093
• 30 years  =  $124,839
• 40 years  =  $228,903

Remember, it’s not how much money you make that will determine whether or not you become wealthy – it’s how much you save. Help yourself by taking a disciplined approach to saving. Pay yourself first and do it automatically.