I think that many people view money entirely the wrong way. Not you and me obviously because here you are reading this and here I am writing this. We have interest in reading, learning and thinking about better ways to earn and invest money and, ultimately, how to act upon what we have read, thought about and learned.
Many people, however, look at money that they earn or receive purely as a means of paying other people - the electric provider, their mortgage lender, their car payments and credit cards and the myriad other expenses that we incur simply by living our lives.
Another way to think about it is Nos Vive, Reddite Igitur Nobis. "We Live, Therefore We Pay."
We pay taxes, insurance, for groceries, utilities, taxes, for education and so on and so forth. Those of us with families pay countless businesses and individuals just by living our lives. This Saturday alone, my family spent well over $200 on groceries, on cash for our daughter who is currently at Six Flags Great America, for my doctor, for coffees and an Egg McMuffin that I purchased at McDonald's on the way home from the doctor's office. I also just paid the guy who mows my lawn $100 in cash because he only takes cash (smart man!). You get the picture.
Last night, I spent about $150 between going downtown with my son to catch Dee Dee Bridgewater at Symphony Center, plus the Metra tickets, plus dinner out for the two of us, plus dinner out that my wife took our daughter to while we were out.
The cash keeps flowing, and mostly out. We are living, therefore we are paying.
While money is a valuable tool and means of exchange for goods and services that we want and need, it is important to stop and ask yourself if you are paying yourself.
In order to set yourself up for success as an investor; someone who is able to take care of themselves and loved ones financially, someone who can ultimately become financially free, or independent according to the current parlance, Paying Yourself First should become your top priority if it is not already.
The investing strategy for most people is the polar opposite of Paying Yourself First. What they do when the money comes in is they sit down and pay their bills. I would not ever say or write that you should forego paying your bills. When I pay my own family's mountain of bills throughout the month while sitting at the PC in our den, I announce the good news or pose questions to my wife or kids if they are around.
"Do you think we should keep having electric and water in our house?" I may ask my daughter as she uses her iPhone, iPad or iWhatever before or after bathing.
"Good news, you can drive the Subaru for another month," I tell my wife upon submitting a $267 monthly lease payment.
"Do you want to keep going to college this month?" I sometimes ask my son when he is home over the weekend prior to paying the $2,500+ monthly payment to his college. I do not ask every month because I often pay it while he is there and I am afraid that he would rather take the money and move to New Orleans with his trumpet than continue going to college and pursuing a bachelor's degree in music.
I Pay Ourselves First
But even before I pay the mountain of bills that continue to roll in electronically and on paper to keep our fairly typical middle class suburban family (albeit with two overachieving kids) in the lifestyle that we have become accustomed to, I always make sure to Pay Ourselves First. I adopt that jargon rather than the typical "Pay Yourself First" phrase because my better half has never invested a dollar on her own, thus I invest for her. I have also Paid My Children first for most of their lives in order for them to pursue higher education without taking on an enormous amount of debt.
Most other people who I know pay the same sort of bills that we have, and then set aside money for entertainment and other non-essential purposes. Then they invest whatever they feel is "left over." Many times, there is not anything left over, so the amount invested becomes a big fat goose egg.
If that is the case with you, Dear Reader, I do not judge whatsoever. Because besides contributing monthly to my children's college accounts for fifteen years, that was me.
Many months and even some years I did not contribute to my or my wife's Roth IRA accounts. We simply did not have the funds left over while juggling the slightly less high mountain of bills than we currently have on my salary alone. Also, my salary was considerably lower than the $110,000 that I currently earn. I did not know that I should have sent about a hundred bucks each to our accounts back then before paying the bills. As they say, hindsight is 20/20.
Because most people in my age cohort do not embrace the habit of Paying Themselves First, you find many Gen Xers with very little retirement savings despite having been in the workforce for a quarter century or so. Incidentally, I hit that mark in my own career just last week.
If you are only investing the amount that is left over, you may find yourself dependent on social security or greeting shoppers who are little babies now at the local Walmart in future decades. My current boss is fifteen years younger than I am, but damned if I have to work so long as to have someone who is currently in high school or college now boss me around at some store or restaurant in the 30's. That is, unless I do it "just for fun" or for some extra spending cash.
I certainly would not mind photographing happy families at Disney World for a few years after toiling for three-and-a-half decades in local government in Illinois. But I certainly would not want to have to rely on that paltry income to support ourselves.
It's Pretty Important
The fact of the matter is that investing for your future is the single most important thing that you can do with the money you make.
I know that your'e thinking that all the money you pay for things are requirements, and that is right. It certainly would not behoove you to get foreclosed on or have your water shut off because you paid yourself the funds that should have gone to your mortgage lender or water supplier. Thus, if you cannot pay your bills if you Pay Yourself $500 first, then Pay Yourself $250. If $250 is too high, make it a hundred. You get the idea.
The truth in my own view is that investing is the only way for you to grow your savings every year instead of seeing it decline, and then ending up like so many people who have struggled with a lifetime of work, only to end up wondering how they are going to make ends meet in their sixties, seventies and maybe even beyond that.
Paying Yourself First can be a tough discipline to adopt. It does not mean letting your bills go or not spending any money on yourself. God knows that I keep shelling out and shelling out for all kinds of expenses including many that I feel are not necessary, but it does give me some peace of mind when I Pay Ourselves First.
Think of it as a reward to yourself, like I do. One of my many regrets is not having adopted this habit earlier. But as they say, better late than never.
Of course, because we live, we must pay for things, but one of the things that you should pay for is you. The future you will thank yourself.
Many people, however, look at money that they earn or receive purely as a means of paying other people - the electric provider, their mortgage lender, their car payments and credit cards and the myriad other expenses that we incur simply by living our lives.
We pay taxes, insurance, for groceries, utilities, taxes, for education and so on and so forth. Those of us with families pay countless businesses and individuals just by living our lives. This Saturday alone, my family spent well over $200 on groceries, on cash for our daughter who is currently at Six Flags Great America, for my doctor, for coffees and an Egg McMuffin that I purchased at McDonald's on the way home from the doctor's office. I also just paid the guy who mows my lawn $100 in cash because he only takes cash (smart man!). You get the picture.
Last night, I spent about $150 between going downtown with my son to catch Dee Dee Bridgewater at Symphony Center, plus the Metra tickets, plus dinner out for the two of us, plus dinner out that my wife took our daughter to while we were out.
The cash keeps flowing, and mostly out. We are living, therefore we are paying.
While money is a valuable tool and means of exchange for goods and services that we want and need, it is important to stop and ask yourself if you are paying yourself.
In order to set yourself up for success as an investor; someone who is able to take care of themselves and loved ones financially, someone who can ultimately become financially free, or independent according to the current parlance, Paying Yourself First should become your top priority if it is not already.
The investing strategy for most people is the polar opposite of Paying Yourself First. What they do when the money comes in is they sit down and pay their bills. I would not ever say or write that you should forego paying your bills. When I pay my own family's mountain of bills throughout the month while sitting at the PC in our den, I announce the good news or pose questions to my wife or kids if they are around.
"Do you think we should keep having electric and water in our house?" I may ask my daughter as she uses her iPhone, iPad or iWhatever before or after bathing.
"Good news, you can drive the Subaru for another month," I tell my wife upon submitting a $267 monthly lease payment.
"Do you want to keep going to college this month?" I sometimes ask my son when he is home over the weekend prior to paying the $2,500+ monthly payment to his college. I do not ask every month because I often pay it while he is there and I am afraid that he would rather take the money and move to New Orleans with his trumpet than continue going to college and pursuing a bachelor's degree in music.
I Pay Ourselves First
But even before I pay the mountain of bills that continue to roll in electronically and on paper to keep our fairly typical middle class suburban family (albeit with two overachieving kids) in the lifestyle that we have become accustomed to, I always make sure to Pay Ourselves First. I adopt that jargon rather than the typical "Pay Yourself First" phrase because my better half has never invested a dollar on her own, thus I invest for her. I have also Paid My Children first for most of their lives in order for them to pursue higher education without taking on an enormous amount of debt.
 |
| Many months I Paid Ourselves a Big Fat Goose Egg. |
If that is the case with you, Dear Reader, I do not judge whatsoever. Because besides contributing monthly to my children's college accounts for fifteen years, that was me.
Many months and even some years I did not contribute to my or my wife's Roth IRA accounts. We simply did not have the funds left over while juggling the slightly less high mountain of bills than we currently have on my salary alone. Also, my salary was considerably lower than the $110,000 that I currently earn. I did not know that I should have sent about a hundred bucks each to our accounts back then before paying the bills. As they say, hindsight is 20/20.
Because most people in my age cohort do not embrace the habit of Paying Themselves First, you find many Gen Xers with very little retirement savings despite having been in the workforce for a quarter century or so. Incidentally, I hit that mark in my own career just last week.
If you are only investing the amount that is left over, you may find yourself dependent on social security or greeting shoppers who are little babies now at the local Walmart in future decades. My current boss is fifteen years younger than I am, but damned if I have to work so long as to have someone who is currently in high school or college now boss me around at some store or restaurant in the 30's. That is, unless I do it "just for fun" or for some extra spending cash.
 |
| The Money Mensch may photograph your family some day at Disney World. |
It's Pretty Important
The fact of the matter is that investing for your future is the single most important thing that you can do with the money you make.
I know that your'e thinking that all the money you pay for things are requirements, and that is right. It certainly would not behoove you to get foreclosed on or have your water shut off because you paid yourself the funds that should have gone to your mortgage lender or water supplier. Thus, if you cannot pay your bills if you Pay Yourself $500 first, then Pay Yourself $250. If $250 is too high, make it a hundred. You get the idea.
The truth in my own view is that investing is the only way for you to grow your savings every year instead of seeing it decline, and then ending up like so many people who have struggled with a lifetime of work, only to end up wondering how they are going to make ends meet in their sixties, seventies and maybe even beyond that.
Paying Yourself First can be a tough discipline to adopt. It does not mean letting your bills go or not spending any money on yourself. God knows that I keep shelling out and shelling out for all kinds of expenses including many that I feel are not necessary, but it does give me some peace of mind when I Pay Ourselves First.
Think of it as a reward to yourself, like I do. One of my many regrets is not having adopted this habit earlier. But as they say, better late than never.
Of course, because we live, we must pay for things, but one of the things that you should pay for is you. The future you will thank yourself.
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