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Why Good Personal Finance Starts with Paying Yourself First

For a lot of people, the thought of managing personal finances is an exhausting concept. You know that you should be taking more control over your spending habits, but the idea of watching every penny is overwhelming. If you think that managing your personal expenses is a frustrating and even boring experience, then you might be approaching it from the wrong angle.

The truth is that a spending plan can give you more control over your life. While you might not obtain a net worth like Floyd Mayweather, you can ensure that you have cash left over each month to spend on the things that matter to you. Many financial advisors and planners will recommend taking an active approach to managing your money. After all, that’s the only way you can ensure you’re spending less on things like unnecessary bills and interest rates, and more on the things that you love.

Why You Should Always Pay Yourself First

One lesson you’ll learn when you start adjusting your approach to budgeting and financial management is that it’s always a good idea to pay yourself first. A lot of people assume that as soon as they get their cash from their jobs, the first thing they need to do is pay off their bills and push as much money as they can afford into getting rid of debts.

While it is a good idea to break down your debts as much as possible, it’s essential not to forget about your future and your current needs. Paying yourself first means dealing with the must-have expenses like mortgage, rent, and car expenses, then looking at the money you have left to put away for retirement, emergency savings, and other future expenses.

Emergency savings are crucial for ensuring that you always have something to fall back on when something goes wrong in your life. After all, no-one can prepare for everything. There’s always a chance that you could lose your job or end up with a huge health insurance bill to pay. Giving money to your emergency savings first might mean that you can’t spend a fortune on trying to pay off your debts, but it could be worth it in the long-term.

Make Saving Mandatory

Often, one of the biggest mistakes that people make when it comes to handling their finances is that they assume saving is a “want” rather than a need. However, your savings are your lifeline for those difficult times in life when you might have nothing else to turn to. By making savings mandatory, you can ensure that you always have what you need to sleep easy at the end of each day.

Set up a separate savings account, and a direct deposit from your current account. This will mean that every time you get your wages, a portion of what you earn will go out of your account. That way, you’re less likely to tell yourself that you can skip paying yourself first for yet another month. It takes some getting used to this strategy, but it will be worth it in the long-term.

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