‘Put Your Money Aside First’ Rule
One of the greatest advice I ever received concerning money management was this: Always put aside some money for yourself first. However simple, this tip might appear a little tough to follow. You might ask, “Should I deal with my debts first?” or “Should I clear out my credit card balance?”
Sure, this rule can be maxed out to the point where you always secure your savings, retirement, or goal accounts first. Sometimes, this may or may not get you the best results. Or you might even find it to be the worst advice and end up sinking in debt and bankruptcy.
Here’s where common sense takes the lead. In order for this practice to work, you first need a solid budget and a plan. Start by crafting a practical budget. Do your math to determine how much you need to put aside for needs like rent, utilities, debt clearances, mortgage, and more.
Next, figure out your numbers. These are the numbers you’ll be needing to put yourself first financially: the amount you wish to contribute to your IRA every month, the amount you can comfortably squirrel away into an emergency fund, the amount set aside for your kids’ college fees, or to buy your next car in cash.
Once you’ve identified these, the first thing to do when your paycheck comes in is to move those amounts into separate savings accounts. This way, the money isn’t there to tempt you anymore. The quickest route to falling short of your long-term financial goals is by leaving spare cash in your account. It might seem like you have an excess and spending it on a dine-out or shopping for a new outfit seems totally affordable, but in truth, that money was set aside to ensure a simpler future.
So, the question stands – Are you putting your money aside first?