Living Paycheck to Paycheck? How To Pay Yourself First

Lyn Allure
18 Aug 202422:38

Summary

TLDRIn 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.

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Related Tags
Financial PlanningSavings StrategyInvestment TipsBudgeting AdviceMoney ManagementDebt ReductionEmergency FundPersonal FinanceIncome FluctuationFinancial Goals