In this day and age, getting ahead financially is truly an uphill battle — especially when you are making critical money mistakes. Luckily, these mistakes didn’t stop me in my journey to better financial days but here are some warning signs you may be managing your money in less than ideal ways.
Number 1: You pay yourself last
The simple act of paying yourself first is among the most certified financial advice ever given. After all, you did the work, so why should you de-prioritize yourself by paying yourself last? This concept is a significant pillar in personal finance; and many financial experts consider “paying yourself first” a golden money management. Now, maybe you’ve heard this advice before or were bestowed this wisdom from your parents. If this is the case then you’ve been fortunate to date but if this is news to you or you’ve neglected to employ this money management strategy then this is likely contributing to your financial demise.
At the core, paying yourself first just means that you’re taking care of building your savings and investments before you start passing off your cash to others. This money should be saved or invested before you spend money on a new TV, settle your kid’s allowance, buy groceries or even pay your utility bills.
It cannot be overstated that you should make sure there’s always a portion of your earnings going into savings. When people normally get paid, their first priority is paying their bills or spending to appease themselves. Then, after these items are crossed of the list, whatever scraps are left and sent into savings and as you can imagine, most of the time this amount is minimal.
For many people, it may be easier to implement the notion of paying yourself first by setting yourself as your most important creditor every month. You can begin with tiny amounts such as $100 every payday. You can also utilize automatic payroll deductions to automate this process. By employing this approach, you don’t have to think about how much to save or even risk being tempted to spend that money given that the whole process is automated. In fact, if you ask me, sometimes being lazy, by automating that is, can be one of the best ways to get ahead financially.