Investment Academy #4 – Pay Yourself First

  • Saving 10% of your total income is a good goal.
  • Set up automatic transfers into savings on the day you get your paycheck.
  • If you pay yourself first, you won’t even notice there’s less money to spend.

Now that we’ve decided that you can afford to start, how do you go about building up that investment fund?

If you’re someone who has trouble saving money, this is where the biggest change is going to have to come. You can’t invest without being a disciplined saver.

Instead of saving what you don’t spend, spend what you don’t save.

Think of this as investing in yourself. You need to learn to pay yourself first.

You already pay the companies behind your credit card, gas, water, electric, cable, and phone bills every month, right? Now, add yourself to the list

So how much should you pay yourself?

Aim for 10% of your total income, but anything is better than nothing. It may seem like a lot to those who struggle every month to pay the bills, but the less you have at hand, the less you’ll spend. Set up automatic transfers so your savings leave your account as soon as you get paid. You’ll be amazed at how fast you can adapt to spending a little bit less.

Ideally, you should be investing this money in the stock market, where its 10% average annual returns and compounding can begin building your wealth. However, if you know you’re going to need that money in the near future, it’s better to keep it in cash. This will ensure you don’t have to sell your investments prematurely and lose money in a down market.

Once you’ve built up a cushion of emergency money, you can start investing.

Thank you for reading and hope you learned something new.
In case you want to learn more things about investment check more articles from our Investment Academy.