| If your habit is to wait to
see how much is left at the end of the month and that's
how much you'll put in your savings account...
You'll never end up saving anything.
"Pay yourself first" is a very famous
piece of financial advice that means decide how much you
will save AT THE BEGINNING of the month (or the week, if
you get paid weekly) and put it away in an account that
you won't touch.
When you get your main job (if
you don't have it already), in addition to your
retirement account, you should have a goal of saving at
least 10% of your salary -- that's before taxes, not
after. So, if you make $50,000 a year, you should
save $5000 a year... or more, if you can.
I know that, when you're just
starting out, it seems like a lot of money... So,
here's what you do...
The first month of your savings
plan (which is hopefully the first month of your job),
save 2%... So, if you
make $5000 (before taxes),
that's $100. And be
sure to do it BEFORE you put that money in your checking
account! $100 into savings,
$4900 into checking.
Do the same the second month.
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The third month of your savings
plan, save 4%... That
would be $200 into savings
and $4800 in checking.
Do the same the fourth month. The fifth and sixth months,
bump it up to 6%...
$300 into savings and
$4700 into checking.
The seventh and eighth months,
go up to 8%...
$400 into savings and
$4600 into checking.
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The ninth month, you can move
up to your goal of 10%...
$500 into savings and
$4500 into checking...
AND KEEP DOING IT!
Now, on the thirteenth month
(that's the beginning of the second year), I want you to
do something wild. Put your
10% into savings ($500),
88% into checking (that's $4400)...
And the last 2% ($100)? I
want you to donate it. Yes, pay yourself
first and do something wonderful for someone else too!
Give it to cancer research or to help feed starving
children. Do this for a few months and I challenge
you to bump it up to 4%...
and 6%... I know of
many people who's standard is to donate
10% or more. You need
to find your comfort zone on this.
Always be aware of what you have
been given and give back -- as much as you can!
Remember that the best way to
pay yourself first is to contribute as much as possible
to your employers retirement plans (401K, 403B, etc.)
Not only are you saving the money, but you are saving on
your taxes too. And your employer may have a
"matching" program which is even more bonus money coming
your way.
NOTE:
If you have credit
card debt, DO use the above plan, but put the "savings"
money towards making extra payments on those cards!
It's silly to save money and make 2-7% interest, when
you are PAYING 20% somewhere else.
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