Thursday, November 06, 2008

Paying Yourself First

So I finally received my Federal tax refund earlier this week. I think it actually came yesterday, IIRC. $2484. Not bad. So I deposited it along with $15 that I have saved in the last week.

(On an unrelated note, my personal saving has really declined recently. I haven't carried as much cash in the last few months, and in the interest of fitness, I have stopped eating as much junk food, especially from vending machines. So I guess the drop in cash saving is a positive sign. I did increase my automated saving recently, however, to $700 per pay period. That's effectively 30% of my monthly net income.)

Anyway, I decided to take a bit of time this morning to do some saving. Of the almost $2500 I deposited on Wednesday, $1250 was transferred to my brokerage account so that I can re-balance my Satellite Portfolio. Another $500 was transferred to my emergency savings account, which replaces $500 I transferred out a few weeks ago as an insurance policy on some upcoming spending. Depending on how my automated payments on my secondary credit card go, I may transfer another $500 over there and really be $500, not just at break even.


So $1750 has been allocated to savings of some sort out of almost $2500. I think that's respectable. The additional $500 may be icing or, even more likely, I will put it against my accumulated debt on my primary card. (The secondary card is now encased in ice. More on that in my October update.)

Whatever is left from the $2500 will be used to fund my snowboard. I estimate about $249 left over, all told.

The whole point here is that you must pay yourself first. It feels great, and that should be enough reason for anyone to do it. Second, you can't help others (if you are so inclined) if you yourself need help. Eliminating your debt, having your retirement saving locked up, having an investment program, and emergency savings is all about positioning yourself to do with your time - your life - that which is important to YOU. Money is the tool to that end. Whatever is left, and there should be something left, do with as you please. That's the payoff for successfully completing the other phases. Indeed, you need to build that into the overall picture so that you have a bit of motivation.

Its like working out. I work out to improve and show respect for my body. Your body is a loaner that is taken if you don't treat it right. However, we all have something we like which is diametrically opposed to a fitness goal. It may be food in general, or a specific cuisine, beer or other alcoholic beverages, or laziness. So you have to build your program to take these factors into account. Your financial program should never feel like punishment, otherwise you will subvert yourself in rebellion. That serves NO ONE, least of all YOU. Build in the slack. You should enjoy everything, both the act of saving and investing, accumulating and growing your wealth, along with the act of spending what you have accumulated on those things that are important to you. (Things that are NOT important to you should ruthlessly and efficiently be cut out of your life, with extreme prejudice.)

Also, every victory should be celebrated. Why? Because it represents CHOICE. A choice to do something that supports the achievement of your goal. (You do have written goals, with deadlines and implementation plans, right?) You have chosen your goal over other available options. Celebrate the process of moving closer to your goals all the time!

So how are you paying yourself first? And how are you rewarding yourself for doing so?

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