If you haven’t read George Clason’s The Richest Man in Babylon, this truly is a must read for all ages. It was written back in the early 1900s and is full of sound financial principles that are rock solid to this day.
The first idea Clason discusses is that a part of what you earn is yours to keep, in other words pay yourself first.
What Does Pay Yourself First Actually Mean?
You have probably heard it at some point, and like many people so often do, thought, “This is an amazing idea, I must do this!” Then like too many people do, went on your normal way, never digging deeper or implementing anything you learned of paying yourself first.
Here’s some quick, easy, actionable advice to implement right away: Take time to actually think it through, and come up with a reasonable percentage of your earnings that you are going to pay yourself, the amount is less important at this point than actually building a system which you can build on later once you’ve got momentum and developed the habit.
Write it down, and commit to paying yourself that amount each paycheck, and do this first before you pay any other bill or debt.
That’s the plain and simple concept. And that’s exactly what it’s supposed to be easy to understand and follow. If it wasn’t, you’d likely not do it at all, let alone for the long-term.
Robert Kiyosaki, author of Rich Dad Poor Dad and many other financial and business titles, tells the story in several of his books that he would always pay himself from any gain he got—no matter what. He even chose to be late on bills and other payments in favor of taking his share first, which is not necessary but shows how powerful it can be. To be expected, various people were mad and bill collectors were calling, but he ensured the principle of paying himself first was ingrained down to his core.
I do not advocate to skipping paying your bills, but do feel doing what it takes to deep down ingrain the principle to where it comes naturally and simply happens.
Why Pay Yourself First Works
You might say, “This couldn’t work. My business is different. I can’t pay myself first. I can’t change the way I’m doing things now.”
Consider this: Changing the way you think might completely change your life. You are no different, you too can pay yourself first. There really is no magic formula or secret strategy to this, just simple addition and subtraction.
When it comes to paying yourself first, it’s a basic principle that most people know but just do not practice.
I contend that you DO have the time to do this, and you can always beg, borrow, copy, or pay to figure out exactly how. This isn’t rocket science, we are talking about keeping more of the hard-earned money you make for yourself and mastering this powerful financial principle.
Take control of your financial life with this all important step and take charge of where your hard earned dollars go.
The Bottom Line
Another way to look at is by considering where you are currently, could you handle another market crash that lasted many more months or even years? Would you be fine when real estate prices take a major hit again?
If you do not and you think you don’t have the time and bandwidth to do something about it, then when the next downturn comes, you could be looking for a job yourself or letting a lot of good employees go.
Having a surplus of cash in your account and a system to manage your profit can provide both wealth and safety for you and you family. It gives you a peace of mind that you can overcome economic downturns that are sure to happen in your life. Your employees, your business, and your family will thank you when they know that you are all set to tackle whatever may come.