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Pay Yourself First
By: Drew Miles
Schools do not teach thrift: college, high school, junior high—our system
doesn’t place a high priority on frugality. And what a shame. We should put
money aside regularly using a simple system—pay yourself first.
For example, when you pay your utility bill, pay yourself first. I’ve talked to
people who have mastered saving money who have become very wealthy. Many of them
have had to make tough choices—pay the phone bill or savings account? All of
them chose to pay themselves first. They got on the phone with the phone company
to buy time and negotiate a payment plan. Figure out a way, but pay yourself
always.
You must pay yourself first, or you’ll negotiate away your savings. You want to
have at least six months of living expenses, liquid. Savings is money you set
aside that you never spend. Ultimately, you’ll invest it, generate passive
income and get out of the rat race.
Recommended savings
60% Long-term savings
20% Emergencies
optional % “Emotional” (vacation/car savings account) (optional)
Or another way to think about it…
10% Yourself
10% Tithe
10% Pay down any debt you have (and commit yourself to not run up more debt)
70% Do anything you want with it
Once you get the ball rolling, you can shift your savings into a CD, then shift
it again into something with stronger returns. Your initial goal is to live on
90 percent of your earnings. The average American lives on 110 percent of his
earnings. You can do it.
Another, separate, prong of this saving strategy is to tithe another 10 percent.
It could be given to your church, the Red Cross, Habitat for Humanity, or any
other organization you’d like to benefit. In my opinion, we owe it to our
community and each other to be responsible and giving stewards of our money and
do good in the world. I encourage us all to incorporate tithing into our savings
plan of action. Your generosity will come back to you.
About the Author:
During my years of law school, I completed an internship with a New York Supreme
Court Justice and second legal internship with a law firm and also began
investing in real estate. Immediately upon graduating law school and passing the
bar exam, I opened my own law practice. From 1988 to 2001, I practiced with my
partner under the name Miles and Gillard, where I concentrated in the area of
real state and business law. Drew Miles. Find Out More: www.americantaxreliefonline.com |
