Take a long-term view, focus on yourself and what is important to you if you want to secure a good future. A practical example is the awareness you should have when you apply for a mortgage from the bank. If you ask for a mortgage at 35 you will have a better chance of having it than at 45 because life expectations are different, so it would be a mistake to work hard to put back all your savings to reduce it or even pay it off as quickly as possible.
Maybe you reach 45-50 years with sacrifices and sweat to pay it off, but then you will not have the same advantages or possibilities to ask for further financing, perhaps to buy a second home that could generate a second additional income with a rent.
Develop good financial habits
Paying yourself first helps you develop good financial habits that will allow you to advance on the path of financial freedom.
By contributing a certain amount to your savings and investment accounts each month, you will develop discipline and be more thrifty. You will stop being a consumer minded person to be a saver and investor. For more you can Get more info about the same.
Perhaps what should be any person’s great financial goal. Financial freedom is totally achievable for anyone who truly desires it.
Of course, you cannot get financial freedom without effort and perseverance. You will have to save and invest, perhaps in stocks, perhaps in bonds, more simply in property, if you have good intuition in companies or any other type of investment.
How to pay you first?
At this point it will be clear to you that paying yourself is a simple and effective concept to start saving. But you may be wondering what you need to do to put this savings strategy into practice. Well, here are some steps of what you need to do to get started.
Review your expenses and income
- If you want to know how much you can afford to pay, you first need to have a better understanding of your income and expenses. That is why you will need to budget.
- To determine your monthly income, you need to add up all your sources of income. Perhaps the main one is your salary after taxes and other deductions.
- If you work as an employee or receive money from property rentals or dividends and interest from investments, among other sources of income, include it in your income as well.
- To calculate your expenses, unless you keep good accounting of your bills and receipts, you will need to review your checking accounts to find out what you are spending.
Use your bank statements to find out what your monthly bills and expenses are. Calculate how much you spend on rent or mortgage, food, water, gas, transportation, and so on. Add only what is essential for living. Be cautious and add 10% more for possible unexpected events.