2010年7月16日星期五

Pay yourself first(先付钱给自己)


Most people pay everyone else first – landlord, credit-card company, hand phone operator, Income Tax, and so on. Change that equation. In other words, you must adopt the earn-save-spend habit. We try and budget every day, week, month, and year hoping that if we’re careful we’ll have some money left over. Most people feel that they do not have enough income to save so they procrastinate by saying, ‘I will start when I earn more!’. Even if you haven’t said it yourself, you’ve probably heard a relative or a close friend say it. Trust me, this is impossible. Most of the people continue to live paycheck to paycheck regardless of increasing income. According to Parkinson’s Law, the more you earn, the more you spend! The general rule is that as people earn more money, they tend to spend more money. Ask anyone who got a raise last year if their saving actually increased. In almost every case, the answer will be “no.” Why? Because more often than not the more we make, the more we spend! And at the end of the day we’re still broke. Are you tired of this game?

If you’re making a reasonable salary and still find yourself living paycheck to paycheck, the problem almost certainly isn’t your income – it’s your attitude.

Most self-made millionaires make a decision at a young age to “pay themselves first”.

What does this mean? Some people think that “paying yourself first” means taking yourself put to dinner, but it really means putting aside money that you will invest and grow for the rest of your life.


Income - Saving = Expenses

When you get your salary at every end of the month, pay yourself ahead of others by allocating a certain percentage of your salary to saving before paying your bills. In other words, you must adopt the earn-save-spend habit. Through a systematic, disciplined way of controlling your spending habits and set aside a chunk of your income into saving every month and the discipline to be consistent is what helps you succeed. In order to make sure you save that amount, have it automatically taken out of your account before you pay anything else for the month. The first cheque you write every month should be to you and that should go to your savings. And the more we save, the less we spend and the more we can accumulate. You can never “over-save”. The magic formula, whether you earn minimum wages or RM100 an hour, is to save at least one hour a day of your income. A great goal for late starters is two hours a day of income.

To the extent possible, you may want to arrange to have certain amounts taken directly from your paycheck and automatically invested in accounts of your choice. And if you have the money automatically deducted from your check chances are you’ll never even miss it. Find out about standing instruction (S.I) plan that divert money from your checking or savings accounts into unit trust funds or retirement accounts. You’ll get the advantage of dollar-cost averaging: by investing the same amount each month, you buy more when prices are low and less when they are high and reduces the risk of impulsive or unwise spending that will threaten your savings plan. If possible, save more than you think you are going to need to provide yourself with a cushion.

Twenty years from now you’ll be amazed at how rich you are.

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