Pay Yourself First

"Pay yourself first" means automatically putting a specific amount of money into a savings account from each paycheck at the time it is received. This process is considered to be paying yourself first; in other words, paying yourself before you begin paying your monthly living expenses and making other purchases.
  • A side note here: When choosing a bank make sure you check around and see what type of services they have to offer .
  • What are their charges and or fees? What do those charges apply to?

Budget

A budget is an itemized summary of likely income and expenses for a given period of time. It shows how much actual income you take home or your net income as well as where you are sending you money. Take a look at typical Personal Budget worksheet.

  • This way you can see that the $1 coffee you buy at the gas station everyday adds up to $30 a month and $365 a year! Buying a coffee machine for your home and brewing your own could save you up to 1/2 the cost.
  • Planning and monitoring your budget will help identify wasteful expenditure, adapt quickly to any situational financial changes that come your way, and aid in achieving your financial goals.
  • Starting with our app $aving $ense you can start saving effortlessly; A budget will help cut down on needless expenses; Allowing for additional savings to afford all the needed tools to build your financial house; Creating financial literacy that you can pass along to everyone!

Paying Yourself with a 401k

  • A 401(k) is a retirement savings plan sponsored by an employer. Letting workers save and invest a piece of their paycheck before taxes are taken out.
  • Taxes aren't paid until the money is withdrawn from the account.
  • If you work for a company that offers 401K, jump on the band wagon.
  • Some companies will match what you put into that account and some will have a fix amount that they contribute into it on your behalf. This will help build up a retirement account, an emergency fund, or even a down payment for a house.
  • These accounts have rules and regulations on them. When moving from job to job these accounts can be rolled over to the next company you work for.

Paying Yourself With an IRA

  • There are two different types of IRAs: Traditional and Roth IRAs.
  • An Individual Retirement Account (IRA) is a type of savings account that is designed to help you save money. Allowing for tax deductible contributions throughout the, and withdrawals at retirement will be taxed as ordinary income.
  • Roth IRA is a retirement plan under US law where contributions are not tax deductible, and distributions are made tax free at retirement.
  • Decide which IRA suits you best. Compare Roth vs. Traditional IRAs.
  • Choose an "all in one" fund or customize your portfolio. Pick investments for your IRA.
  • Always you should do your homework before you choose and make the decision that will best suite your needs.

Certificate of Deposit or CD

A type of savings tool that can offer a higher return on your money than most standard savings accounts. A CD is a timed deposit. A savings account you can deposit and withdraw funds relatively freely. With a CD you agree to keep your money there for a set period of time or  term length. Term lengths can be as short as a few days or as long as a decade.

  • The standard range of options is between 3 months and 5 years.
  • The major benefit and reward for keeping your money in a CD is banks offer a higher Annual Percentage Yield than a normal savings account. On a 3 year CD most banks offer a o.5% APY and most credit unions offer a 1% APY or higher.
  • Be sure to choose the right CD for you based on how much you can afford and for how long. Otherwise there will be early withdrawal penalties if you opt to take your money out earlier than the original agreement. Usually between 3 to 6 months of accrued interest.

Rule of 72

The "rule of 72" is a quick way to calculate how long an investment takes to double, when given a fixed annual rate of interest. Divide 72 by the annual rate of return you receive on your investments and this number will represent a close estimate of years it will take to double your money.

  • 72/Compound Annual Interest Rate = Years required to double your investment.
  • 72 is divisible by: 2, 3, 4, 6, 8, 9, and 12 making for easier math.
  • A $10,ooo investment with a fixed annual interest rate of 8%, according to the "rule of 72" would take 9 years to double your money.
  • 72/8 percent fixed annual interest rate = 9 years *Note when entering the interest rate enter as 8 giving you 9 years instead of 0.08 which would give you 900 years.

Share the Sad News

Research on savings indicates that only a small percentage of Americans are following  "pay yourself first". As of 2016, less than a quarter of Americans have enough savings to cover six months' worth of expenses, and 26% of Americans have no savings at all, indicating that over half of the country do not pay themselves first.