It has long been said that paying yourself is the most important lesson in learning to better manage your personal finances. Setting aside a fixed amount of your monthly income first as opposed to giving yourself the scrapes or leftovers is a critical step in taking control of your financial situation. By building your savings you begin to learn the fundamental skills of managing and growing your finances. This additional reserve of money will act as a security blanket, turning most emergencies—like a blown tire on the way to work—into mere inconveniences. It also could become an initial investment for businesses or ideas you might later have that provides for you and your family. By mastering this first step of finances you will open the door to a life unencumbered by money, allowing you to live life by your terms.
In The Richest Man in Babylon George S. Clason multiple times stresses the importance of “starting thy purse to fattening.”[1] Simply put: it’s time to start building your savings. George S. Clason, along with other experts, recommends setting aside at least ten percent of your monthly income. Setting aside more is always a good option if you can feasibly achieve it. I treat paying myself like a bill and set up automatic payments that put the money to a separate account. Setting aside this much money might seem like an impossible task, with all the bills, groceries, and other expenses that relentlessly demand to be taken care of. Saving, although seemingly such a simple task, is often the most difficult first step in learning to manage your personal finances. Once you take this monumental step you will be glad you did and wish you would have done so sooner.
Dave Ramsey, a popular personal financial guru explains that paying yourself first to build an emergency fund alleviates most of the stress you feel on a day- to-day basis. Imagine this scenario: You are a single parent working a 9 to 5 job that is more like working 8 to 7 and living paycheck to paycheck. After dropping your child off with the babysitter on your way to work you blow a tire and the mechanic says you will require a new one. What will you do? This is the terrifying realty for 54 percent of the U.S. Navy’s junior sailors who are considered not financially equipped to handle a situation like this, according to a campaign to improve sailors’ financial readiness conducted by the Department of Defense.[2] This same situation could be reduced to nothing more than a minor inconvenience by setting aside ten percent of your monthly income and building an emergency fund of as little as $1,000, as prescribed in Dave Ramsey’s “Baby Steps” theory. This little comfort will go a long way to ensuring your future and the future of your family.
Once you get ahold of your finances you it won’t be long before you start to look for ways to make your money work for you. This concept in a board term is called investing. There are many ways to invest, such as starting a business or actually going after that “really good idea.” But, investing is not just putting money in the stock market. To truly take advantage of making your money work for your goals you will want to build a decent reserve. This whole concept of putting your money to work for you is known as passive income, meaning that you are earning money even when not physically present. Investing is like planting an acorn, at first it will need your constant guidance and care but before long it will continue to grow and thrive without you and will eventually protect and provide for you.
By mastering this first skill of finances you will discover how easily money comes to those who understand the golden rule of finances. To be a millionaire may not be your goal, as everyone’s level of success is measured differently. But to live a life unencumbered by the burdens and stressors of having too little is virtually indescribable. This is the first step in living the life you want, how you want. It all starts with taking this first step, which can be frightening. But once you take this step it is the most rewarding thing you’ll do. Get out there and live life by your terms.
Endnotes
[1] George S. Clason, The Richest Man in Babylon The Success Secret of the Ancients—The Most Inspiring Book on Wealth Ever Written (New Delhi: General Press, 2018).
[2] American Forces Press, “DoD Campaign to Improve Finacial Readiness,” DoD News (2003).
