"Pay Yourself First."

What do you think of the "pay yourself first " mantra?
It's always kind of puzzled me.

Jason, I saw your post that it was a good idea just as I moved this post to the discussion forum - why do you think it's a good idea?
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Permalink Reply by Slouch on October 16, 2008 at 11:29am

You ever look to the left, then look to the right, say to yourself, where did it all go? - That's why

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Permalink Reply by Maureen Sharib on October 16, 2008 at 11:36am

Sure I have but I'm wondering if this isn't contributory to the failure of many starting businesses?

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Permalink Reply by Jim Canto on October 16, 2008 at 11:56am

Maybe the definition of "pay yourself first" should be clarified for the sake of a clear discussion? Are we talking Bills, Salary, Savings, all of the above ... or something else?

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Permalink Reply by Maureen Sharib on October 16, 2008 at 12:03pm

ALL of it Jim. Pay yourself FIRST above everything - that seems to be the takeaway for most people. I suspect it's not what's intended.

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Permalink Reply by pam claughton on October 16, 2008 at 12:10pm

Maureen,

It usually refers to saving, putting money away, into a 401k or savings account. You pay it first, so you don't delay saving.

Here's a blurb that explains it well,
A phrase commonly used in personal finance and retirement planning literature that means to automatically route your specified savings contribution from each paycheck at the time it is received.

Because the savings contributions are automatically routed from each paycheck to your investment account, this process is said to be "paying yourself first", or before you begin paying your monthly living expenses and making discretionary purchases.

This simple system is touted by many personal finance professionals and retirement planners as a very effective way of ensuring that individuals continue to make their chosen savings contributions month after month. It removes the temptation to skip a given month's contribution and the risk that funds will be spent before the contribution has been made.

Regular, consistent savings contributions go a long way toward building a long-term nest egg, and some financial professionals even go so far as to call "pay yourself first" the golden rule of personal finance.

It's true too, if you routinely take 10% or whatever amount you choose off the top and automatically put it into a 401k or savings, you don't even feel it, and it adds up quickly.

Maureen Sharib said:

ALL of it Jim. Pay yourself FIRST above everything - that seems to be the takeaway for most people. I suspect it's not what's intended.

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Permalink Reply by Maureen Sharib on October 16, 2008 at 12:32pm

I understand where it's coming from for employees but I've seen it bandied about loosely among entrepreneurs. I think it may be one reason why so many fledgling businesses fail. Sometimes a business owner must pay himself last.