It happens every time you get paid or end up with a little cash in your pocket. Most of the earned money goes to bills. You pay rent, cable, cell and on and on until you’ve got little to nothing left over. Then you wait until the next pay day to do it all over again.
It’s a dumb way to handle your money. I can say that because I do it and I’m pretty dumb with money.
Financial adviser David Bach, author of The Automatic Millionaire, recommends a different strategy. He suggests paying yourself first. Here’s why…
When most people get their paychecks, they spend it on their necessities, fixed costs, and “wants,” and then save whatever is left over. This is a faulty system, he notes, because oftentimes whatever money is left over is not enough. Instead of saving your leftovers, he says, you should consider your savings a fixed cost that is just as important as your rent, and that you must pay every month before you start spending on dinners out and other “wants.”
Washington has another bit of advice. Saving money is a marathon and not a sprint.
Washington explains that you don’t have to tackle saving all at once — you just have to take one small step in the right direction, like downloading a budgeting app today and connecting your accounts tomorrow. “Progress beats perfection. ”
Once you do start saving, or making more money, don’t fall victim to what author and financial expert Patrice C. Washington calls “the money lie.”
Washington explains that thinking you’ll start saving when your income grows is a common “money lie” people tell themselves. She says that looking at entertainers, athletes, and celebrities who have had millions “pass through their fingers” should make it clear that simply having more money doesn’t guarantee you’ll make smart choices with it.
“How you manage $100 is likely how you’ll manage $100,000,” she says. “You’re the same person with the same attitude, and the same behaviors and habits. It’s not about getting more money. It’s about being more disciplined with the money you have.
So if you’re awful with $100 you’ll be awful with $100,000 but blowing that much money is way, way worse.
[via Business Insider]