"A part of all I earn is mine to keep" Samuel Clason- The Richest Man in Babylon
Pregame Prep (today's overview)
Today's playbook is going to focus on a financial concept that I believe is fundamental and very important: paying yourself first. Financial freedom and a sense of abundance go hand in hand with a healthy mindset so I'm going to be more practical today to help you build a fundamental process and find freedom quicker.
The idea behind paying yourself first is simple: before you pay any bills or expenses, set aside a certain amount of money for yourself. This money isn't to buy yourself something right now, its not for a fancy vacation, or some new material possession. This money should be saved in a savings account (such as 6 month emergency fund- we'll discuss this soon), used to pay off debt, invested smartly in the stock market, or put in a retirement account (this is my least favorite other than Roth IRAs- more to come on this too). The point is you're putting yourself and your financial goals first, paying yourself is a very simple yet extremely powerful concept that has helped create the life of freedom I live today.
Film Review (my experience)
I have always been fascinated by the concept of paying yourself first, I read countless books and articles on personal finance since I was a teenager. This was before the internet so I read magazines, books, I even listened to AM radio financial shows about savings, debt, asset preservation, and concepts stressing the importance of saving for the future. So many very wealthy people stressed how important it was to pay yourself first. I had a lot of book knowledge well before I had any money at all and I thought I knew it all. This won't be the the last story where I think I know it all, only to realize there is so much more to learn.
When I landed my first job I remember getting that first paycheck. It was a physical check as there wasn't direct deposit. I couldn't wait to put my knowledge into practice. I walked into the bank on my lunch break and cashed it all at the bank! Standing there in the bank lobby I held what at the time was a large sum of money. All the while thinking: "this is what paying yourself first looks like." After I stood there holding all that money it didn't take me long to realize that yeah this is literally paying myself first, but now what? "What am I supposed to do with this cash"; after all I had to go back to work and my first job was manual labor so I was headed back to digging ditches... I went back to the bank teller and deposited most of the money back in my checking account and although the bank teller sorta looked at me in a confused way holding that cash in my hands meant something to me. I felt the power, the energy in money. Going forward I stopped cashing my paychecks and started paying myself through bank transfers!
Setting a side a portion of my income for savings and investments has been a fundamental action that led to my financial success. There were times when I didn't have enough to cover all my bills: I had to work extra hours, or find side hustles. There were a couple times where some bills didn't get paid on time. I had to cut back on unnecessary expenses, and let go of the comparison trap. I still pay myself first decades after my first paycheck, although my 'work' life today looks much difference I still invest in myself first because if you aren't looking out for you, why would we expect anyone else to!
I always understood that paying myself first is very important and a lifelong action. It wasn't always easy, but hindsight it was always worth it. This 'simple' method, helped me become the master of my finances and it enables me to live the life I want. Investing in myself before anyone else contributed to the life of freedom I live today.
Paying yourself first is not just about cashing your paycheck, it's about creating a habit of saving and investing for your future, and even when things get tough, you should never give up on your commitment. Stop paying other people first, put yourself first!
Offensive Game Plan (actions to obtain freedom)
Start small: If you're new to the concept of paying yourself first - just start small and gradually increase the amount of money you set aside. If you are already paying yourself first, evaluate if you can make small increases to the amount you pay yourself.
Make it automatic: Set up automatic transfers from your checking account to your savings or investment account. This way you won't have to think about it, it will be done automatically. I can't stress this enough, if you don't see it you won't even think about this money.
Prioritize your goals: If you wrote your eulogy (EVERYONE should) you know what is important to you. This is where you use your statement of purpose to filter what you are saving for!! Decide what you want to save or invest for, whether it's an emergency fund, a down payment on a house, whatever your dream is: knowing your goals will help you stay focused and motivated.
Learn about investing! Figure out all of your options and take action! I have so many more topics on this that I'll be writing about soon. If you don't want to wait, reach out to me through the links at the bottom.
Defensive Game Plan (actions to defend your freedom)
Do not get discouraged: small consistent actions over time is is powerful. Consistency is key! I believe that the days might seem long, but the years go by so fast. Just give yourself grace and trust the process.
Avoid lifestyle inflation: As your income increases, it's important to avoid lifestyle inflation and instead put that extra money towards your financial goals.
Create a budget: Having a budget in place will help you stay on track and ensure that you're not overspending.
Special Teams (tips and suggestions)
Automatic savings transfer: I'm repeating this because it's key, if you don't see it and you set up automatic transfers from your checking account to a savings account on the day you get paid your savings snowball. This way, you pay yourself first without even thinking about it.
Micro-savings apps: Use apps like Digit, Qapital, or Acorns that automatically round up your purchases and save the extra change for you. (I don't use these personally, but I believe there is value here if you have a hard time saving).
Pro tip- I did this every year! If you get a regular yearly raise, instead of letting that money hit your checking account, send the ENTIRE raise to your savings! You can also increase the contribution of your retirement by the amount of your raise, or a percentage.
Penalty Flag: (do not break these rules)
Do NOT wait! It's important to start paying yourself first: the earlier you start saving and investing the more time your money has to grow. Waiting to start paying yourself first can make it harder to reach your financial goals in the long run and make it harder to overcome unexpected expenses. Best time to start was yesterday, next best time is today.
Post-Game Review (key takeaway)
It's important to remember that financial freedom is not just about making more money. Money is a tool to help you live the life of your dreams. Money is a resource that we all need to varying degrees. By following this Playbook to Freedom and paying yourself first, you take control of your finances and you will achieve financial freedom.
Paying yourself first is not just about money, it's also about mindset. Putting yourself and your financial goals first requires a shift in mindset as it requires you to prioritize your well-being and take responsibility for your financial future. By focusing on both your finances and your mindset, you can achieve true freedom and abundance in your life. So, start paying yourself first today and watch your financial freedom grow!
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