Pay Yourself First is just a Platitude?

Pay yourself first.  You have heard this phrase many times before I am sure.  What does it actually mean?  Well for me it means, removing from your spending plan, funds necessary for saving and investment before you satisfy your other operational expenses.

I have been told by acquaintances that are regularly in financial trouble that “pay yourself first” is simply a platitude. Is it?  I gently suggest that they rethink their position. If you operate from the other end of the deal where you wait until you have satisfied all your expenses, you could often find yourself with nothing left to save or invest.  We are very comfortable in our consumer culture and so we really must discipline ourselves to offload income ahead of time to make sure that it isn’t “accidentally” or “purposely” spent, on everything else besides savings or investment. 

As the CEO of your own economy, make sure that you are first on your own payroll.  The responsibility is on you to make these savings and investment decisions.  Spending decisions are often made unconsciously, and they can occur often.  You must make conscious decisions to save and invest and only you can do it.   You will need that stream of income in your future, you really don’t want to be caught without it.

Who's First on Your Payroll?

Some think of it as a platitude, I think it is a major financial tenet - what am I talking about? Pay yourself first. Your ability to build wealth should not be placed on the back burner, it should not be an afterthought, it should not be somethng you get around to after Peter, Paul and Mary have been paid, it should be your first priority.

An easy and painless way to do this is to have your payroll department deposit a fixed amount or percentage into a specific savings account. You can also request that a portion of your tax refund be placed into that account [the IRS will direct deposit your refund in up to 3 accounts - use Form 8888]. From this holding fund you can make your investment decisions at intervals that are appropriate for your financial goals.

Financial Planning the Right Way [VIDEO]

Write down your goals, don't get emotional, and stay on course. Watch the Video. from the Forbes.com Video Network.