Living Paycheck to Paycheck? How To Pay Yourself First

Summary

In this video, the concept of 'paying yourself first' is explored as a strategy for financial stability and independence. The speaker emphasizes the importance of setting aside money for future savings and investments before covering expenses, to avoid overspending and build a safety net. The video offers advice on implementing this strategy, creating an 'emergency fund', and aligning financial habits with short-term, medium-term, and long-term goals. It also addresses different income types, suggesting tailored approaches for fixed, fluctuating, and unexpected incomes.

Takeaways

• 💼 Paying yourself first means setting aside a portion of your income for savings and investments before you spend on anything else.
• 💰 The strategy helps to avoid overspending, create a safety net, and prioritize financial goals.
• 🏦 Suggested savings include having a high-yield savings account or an investment account for diversification.
• 🚫 Paying yourself first is more important than paying off debt, but high-interest debt should be aggressively tackled after.
• 💡 The concept encourages creativity with remaining funds to achieve goals without compromising financial stability.
• 📈 For fixed incomes, automate savings to ensure consistency in paying yourself first.
• 📊 For fluctuating incomes, adjust the percentage paid to savings based on income fluctuations, with a minimum of 10%.
• 💵 With unexpected windfalls, split the amount and allocate half towards savings and the other half for other uses.
• 🏡 Aim for an emergency fund that covers 3 to 6 months of living expenses, also known as a 'peace out' fund.
• 🌐 Diversify investments to include a mix of stock market, real estate, or other investments based on personal preference and research.
• 🌱 Emphasizes the importance of consistency in financial habits to see growth in savings and investment accounts.

Q & A

What is the concept of 'paying yourself first'?

Paying yourself first means allocating a portion of every income you receive to your savings and investments before spending on anything else.

Why is it important to pay yourself first?

It helps prevent overspending, creates a financial safety net, fosters the habit of prioritizing financial goals, and allows for creativity in managing finances.

How does paying yourself first help with financial anxiety?

By ensuring financial stability and eliminating the cycle of living paycheck to paycheck, it reduces financial stress and strengthens the relationship with money.

What are the different ways to save or invest the money you pay to yourself?

You can save in a regular savings account, a high-yield savings account, or invest in an investment account such as stocks, real estate, or crypto.

What is the recommended percentage to pay yourself first?

It is suggested to start with at least 10% of your income, but this can vary based on personal financial goals and circumstances.

How should someone with a fluctuating income approach paying themselves first?

They should set a minimum percentage to save and be more aggressive during high-income months to balance out the lower-income months.

What is the purpose of having an emergency or 'peace out' fund?

It provides financial security for unexpected expenses or emergencies, allowing individuals to manage their finances without stress during difficult times.

How much should be saved for the emergency fund?

Typically, 3 to 6 months of living expenses are recommended, but it can be adjusted based on individual circumstances and lifestyle.

What should be done with unexpected windfalls of money?

It's recommended to split the windfall, using half for paying yourself first and the other half for splurging or covering bills.

How can paying yourself first help in achieving short-term, medium-term, and long-term financial goals?

By consistently setting aside money for savings and investments, it allows for the accumulation of funds needed to meet various financial milestones over different time frames.

What is the significance of automating the process of paying yourself first?

Automation ensures consistency and removes the emotional aspect of saving, making it easier to stick to financial plans and see growth over time.