|
 I first learned the phrase 'pay yourself first' from Robert Kiyosaki, the author of "Rich Dad Poor Dad", (link below). And then I beleive I also read it in another book called "The Richest Man in Babylon" by George S. Clason.
Both of these amazing books teach you that you should pay yourself a portion of your income before you pay anything else. The recommended amount is 10% and should be stored in a safe investment like a savings account or even better a fixed deposit because of the higher interest rate.
Secondly you should try to save this 10% until you have at least 3 months salary put aside. Another expert said that because of inflation and job shortages that 8 months salary is the minimum you should strive for. This money serves 2 purposes.
First it acts as a emergency buffer if you should ever lose your source of income because it will allow you to continue living comfortably for at least 8 months(if you saved 8 months salary) and gives you time to shop around for a decent job in the main time.
Secondly, it acts as an investment buffer. Now that you have all that cash put aside earning interest for you, you start a second account for regular savings of your 10%. You can build both accounts a the same time if you can afford to put away 20% of your salary - 10% in each.
Now you can risk your savings on investment opportunities without using 'scared money', that is money you would otherwise need. So if you now have $100 or $200 that you are putting aside each month and a new opportunity presents itself like a huge storewide sale for instance ... you can buy low and then resell for profit.
You can put away some of your savings into a mutual fund or save a down payment for a piece of real estate or just keep on buying and selling products. Or, perhaps you want to give your hand a try at a mail order business - you just run ads in the local newspaper take orders, tack on a modest profit and then place the order with the money your customer already gave you. The only money you risk is the money used to buy the newspaper or magazine ad.
About the Author - Pay Yourself First |
Home 
