Paying yourself first
Every month, you may tell yourself you’re going to save the money you have left over from your work-study or other job after you pay for things you need and spend a little on entertainment. But have you noticed that there is usually nothing left over? It's not just you; most everyone experiences the same thing.
The best way to get around this—and a proven way to build wealth-is to pay yourself first. To do this, you put some amount of money into savings every month, no matter how small to start. Because you put the money away first, you're not tempted to spend it on something else.
This helps you build the habit of saving. Over time, you can save larger percentages of your money.
Right now, it doesn't matter how much you are able to save every month. It could be $10 to $25 from each paycheck. After you graduate and get settled in your first job, strive to eventually save at least 10 percent of your income. This savings practice will go a long way in helping you build an emergency fund, pay off credit-card debt, and establish a solid financial foundation.
Tips for paying yourself first
If you think that paying yourself first is easier said than done, here are some ideas to get started:
- Include “savings” as part of your spending plan. Make it a priority above spending for things like movies or eating out.
- If possible, have your employer automatically deduct money from your paycheck and deposit it into a savings account. What you don't see, you won't miss. Even if the amount is small (say $15, $20, or $30 a week), you'll be amazed at how fast your money grows.
- Another option is to have your financial institution automatically deduct a set amount from your checking account each month and deposit it into your savings account. Your financial institution usually can set the date of the automatic transfer for the day (or a few days after) your paycheck is deposited.
- Put any tax refund, raise, or bonus you receive into savings rather than spending it.
- When looking for a better job, give preference to employers who offer good benefits, such as health coverage and life insurance. If your employer provides these benefits, you won't have to pay for your own coverage.
- When you purchase a product, send in any rebate forms. Most people fail to take advantage of this savings tool.
- When you need items, shop first at thrift stores and garage sales. You can pick up some great bargains this way.
- Break costly habits, such as excessive clothes-buying and smoking, and save the difference.
- After paying off a loan, put the same amount each month into savings-if the money isn't already going to paying off another loan.