Financial Success
So, the other day I was asked the following question:
"What savings and/or investment strategy have you applied that has been the most successful?"
My answer came fast: Pay Yourself First
There are three steps to make Pay Yourself First (PYF) work.
Step 1 is to create a budget to prove what surplus cash COULD be available at the end of the month. For me, this budget is reasonable but should also favor semi-aggressive savings. This is why I don’t like super itemized budgets that cover such things as wrapping paper costs each month. While I am a control freak and generally like lots of detail, I can’t handle that level of budgetary detail in my finances.
Step 2, once a budget has been created and you know how much money you should have at the end of the month this amount is set up as an auto-draft at the beginning of the month. Again, personalities play a big part in the success of a specific type of financial practice. For example, I don’t like moving money from my savings account back into the checking account. So if there is a purchase above a budgeted amount that has to be transferred back into the checking account I generally don't buy it. I really don't like transferring money from the Savings account into Checking.
Step 3, after $1,000 has been accumulated in the savings account (emergency/opportunity fund) any additional funds can be transferred off into higher interest earning accounts to develop wealth.
Questions:
1. Download the editable budget and list all of your income and expenses.
2. Are you currently able to Save 20%, Invest 10%, and give another 10% in Charitable Contributions?
3. What would be your second savings goal after you have saved $1,000 for an emergency/opportunity fund?
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