By now you know Pay Yourself First is the first, and most essential, step toward your Financial Freedom. If you don’t Pay Yourself First, you’ll never reach the point where you can buy your time back. And that means you’ll never be Financially Free.
But first steps are always difficult. You’re breaking ingrained habits, going against the financial myths you’ve heard all your life and changing your relationship with money. So today, let’s look at a few ways we can make taking that first step just a little easier.
Automate Your Way To Savings
Regardless of how much you’re saving right now, immediately automate transferring the designated amount to your savings. Do allow about five days between your pay date and the transfer to ensure the money is actually in your account. But don’t plan on a manual transfer. Take the decision to Pay Yourself First out of your hands. After a few months, you won’t even notice the money has been transferred. Paying Yourself First will be easy and painless!
In Financially Fit Bootcamp, we advise you to keep your long-term savings in a different account than your regular checking. You don’t want that money to be easily accessible. Remember, your Pay Yourself First account is not your Security Buffer. Your Security Buffer should also be in a different, but slightly more accessible account.
Break It Down
Our brains love a reward. And if you’ve never experienced Financial Security, watching your Pay Yourself First account grow is hugely rewarding. If you’ve structured your accounts correctly, your money is deposited and allocated from you Income account. Then each week you transfer your weekly spend from that Income account to your Everyday account. That way you’re never more than six days away from your next “paycheck.”
But if you’re struggling with Paying Yourself First, try making the whole process a little more rewarding. Set up an automatic weekly transfer from your Income account to your Pay Yourself First account. You’ll get the rush each week of seeing the balance in the account grow. And believe me, seeing that balance grow is addicting! Once your PYF is habitual, switch back to the standard method of transferring based on your income schedule.
Set Up A Mini Savings Fund
Remember when you were a kid and you would stash away your allowance in a piggy bank? Use the same method to supplement your Pay Yourself First amount. To this day, I still keep a piggy bank. I dump coins found in my purse, in between the couch cushions or spotted on the sidewalk into that bank whenever I find them. When I have enough, I convert the coins to cash and send them to my Pay Yourself First account.
Pro Tip: If you use a Coinstar kiosk, choose the e-gift card option. Why? Because the standard 12 percent transaction fee is waived. Then use the gift card to pay for your groceries that week, and transfer the amount of the gift card from your Everyday Account to your PYF account.
Use Cash Back Rewards
We love, love, love using the bank’s own systems against them. So if you have the option, pay for monthly recurring expenses using your credit card to earn more cash back rewards. Utilities, cell phone, and sometimes even housing costs, can all go on a credit card. And since you know exactly how much the charges are each month, set up an auto-pay debiting the entire amount directly from your account. When you reach the amount needed to redeem your cash back, send that money straight to your Pay Yourself First account. Always be on the lookout for ways to make your money work for you!
One caveat! This tip is not for you if you don’t feel you’re able to pay off a credit card every month with no exceptions. The temptation to overuse credit cards is very real. Our entire world is engineered to coerce us into spending more and going into debt. So be honest with yourself about what you can handle. Staying out of debt and on the path to Financial Freedom is far more important than an extra $50 every few months.
Have A Plan For “Surprise” Money
Just like with the cash back rewards, transfer small windfalls of money directly into your Pay Yourself First account. Whether you receive an annual bonus, a cash gift or an inheritance, your monthly spend should stay the same. By no means should you use extra income as an excuse to upgrade your lifestyle.
That’s right, no moving into a larger home or buying a new car. These expenses increase your monthly spend and rather than getting closer to Financial Freedom, you’ll be further away. Instead, learn to live joyfully within your means.
Paying Yourself First is fundamental to your financial health. So if you find the concept challenging, follow these tips and start small. Because without Pay Yourself First, you’ll never reach your ultimate goal of Financial Freedom.
The views and opinions expressed are those of the guest author and do not necessarily reflect the views and opinions of MindShift.money.
image credit: Bigstock/PixelsAway
Erin is the managing editor of MindShift.money and the owner of Lane Change Media. As a business owner and content provider, she takes her personal motto, “Don’t slow down, just change lanes” seriously. She lives in Los Angeles and has far too many pets.