Paying yourself first sets you up for an abundant future. Putting money into savings is not only a good habit financially; it also grows your confidence around money. When you have a good relationship with money, you will start to attract more money!
Paying yourself first means a part of everything you earn is yours to keep. Every time you get paid, simply move the money from your everyday bank account into your savings account before you pay your rent, bills, car and any other expenses. The best way to do this is set up an automatic bank transfer to transfer the funds for you, that way you don’t even have to think about it.
The first account you need to set up is your Long Term Savings account. This account will enable you to be financially free! Deposit 10% of your pay into this account every pay day. Your Long Term Savings account (or Financial Freedom account) is only ever to be used for three things – investing in property, shares or business. Under no circumstances are you allowed to use it for anything else, ever!
The second account you need to set up is your Short Term Savings account. The amount deposited into this account is also 10% of your pay. This account is for everything else that you need to save up for, such as holidays, cars, furniture, appliances etc. This is also the account you turn to when unexpected expenses come up.
If you deposit money into your savings accounts regularly, you will start to earn compound interest. This means the money you deposit earns interest and the next month you earn interest on the interest you earned last month! So your bank balance is not only increasing due to your deposits, the bank is also contributing to your financial future. In other words, your money is working for you, rather than the other way around – happy days!
If removing 20% of your pay from your everyday spending account is too much of a stretch for you, remember the habit of depositing money is more important than the amount you deposit. Even if you start by only depositing $5 into each of these accounts, you are creating a good habit that will serve you well in the future.
If you’re unsure about setting up bank accounts, getting into the habit of saving or investing, you can speak to one of our coaches for free.