Pay Yourself First

The Richest Man In Babylon is an absolute classic. It has provided millions of readers with an invaluable source of information since first being published in 1926. One of the major concepts that is distilled in the book and in my opinion is the most important, is the concept of paying yourself first.

If you wish to become financially independent, create a retirement nest egg, or save some money for a down payment for a house, stock purchases or whatever else it may be you will need to start saving money. The book recommends that you begin by setting aside 10% of all the income you earn. This is a very reasonable amount that can be executed by anybody no matter the situation. For example, if you are currently in debt you still have 90% of your earned income to put towards living expenses and reducing your debt obligations. This allows you in a disciplined manner to come away with savings while paying off your debt obligation. An example mentioned by the book for this situation would be to save 10% each month, use 20% of your income to service your debt and have 70% left to use as living expenses. This is just a baseline example and the numbers could be changed in various ways.

Saving 10% of your earned income is a good starting point; however, we encourage you to save closer to upwards of 50% of your income. Although for some this may be unachievable the higher percentage of income you plan to save the closer you are to your goal whether that be 10%, 20%, 25%, 50% or any other number in between the more the better. If you wish to save more money then obviously a key step is to cut down expenditures which can be easier said then done which we completely understand. It comes down to monitoring your expenses and trying to cut some unnecessary expenses out of the picture. Create a budget and spend less money than you earn. This is what it all comes down to.

 

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