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PAY YOURSELF FIRST!Karla M. Leonard, CEO/Asset Manager


"The best money advice I ever got was from my father. He said, "Don't spend anything unless you have to." [Dinah Shore] Wow, when I read this quote it certainly brought back some vivid memories for me. How about you? If you're a Baby Boomer, then a lot of you probably had the same warm feeling when reading this quote...am I right? I say this because the Baby Boomer generation's parents were from the generation that lived through life changing events like; World War I, World War II and the Great Depression. It was a generation that learned very quickly, especially during the war years and after the Great Depression, the true value of a dollar. Those of you who are not Baby Boomers might recall your parents and also your grandparents instilling some sound financial wisdom upon you when you were growing up. "Make a budget, stick to it and no matter what, always 'pay yourself first' (10% of your earnings was usually the base). However, the most important habit to instill within oneself is to be consistent on whatever amount you decide to save and do it on a regular basis. Isn't it intriguing how each generation's value of the dollar has vastly changed? "What happened over the decades since the early 20th Century that's caused this significant change? The results are devastating...here is one! With each generation the desires for acquiring these wonderful 'things' (clothes, cars, tech toys, shoes, etc.) exceeds their ability to pay for them. The advancement in technology over the years - [Hi-Def TVs, computers, cell phones, IPads, Kindles] all offer easy access for anyone to acquire anything they desire. Why aren't these same technological platforms shouting to us to... 'save...save...save' instead of 'buy...buy...buy'? Plus to add fuel to the fire of the buying frenzy, these technological platforms also go the extra mile with offering easy opt into credit cards, easy access to loan companies where one can borrow from $100 to thousands of dollars. It seems almost impossible to stay financially afloat, especially when we throw into the mix, that today the cost of living for many exceeds what they are earning. If the money isn't in your wallet, or bank account it can be easily acquired via the internet or by using your credit card. Guess you're asking then, "How does one get back on track to the good 'ol fatherly advice of 'spend less than you earn and save or invest the rest'?" "Pay Yourself First and Stop Spending!" It is important to stress, no matter what your income bracket is...the first rule is to "ALWAYS pay yourself first and place the funds into an account that offers tax preferential growth options which will enhance and stimulate growth." This is the first rule that you should discipline yourself to follow 'hands down'! It is a tremendous rule to teach your children when they are young and when you start giving them their first allowance. Let me tell you something...this works! Do you remember the first day your Dad gave you your allowance? Wow! I remember it like it was yesterday. My sisters and I were so excited to have our very own money to spend. "Hold it right there!" we heard our Dad say. This is where my Dad stepped in and corrected our thinking right out of the gate. I can still hear his words of advice, "From now on you each will receive an allowance each week for doing all your weekly chores. However, before I lay a dime into each of your hands, you each will be required to budget your allowance." "Budget?", we all thought, looking at each other like he was speaking a foreign language, "what the heck is a budget?" Dad said, "the first thing you must learn is to 'pay yourself first'. "Hmm," we each thought, "but we did just get paid, what are you talking about?" Our Dad was patient and understanding of the confused look on our little faces...he continued, "I am paying you, but now you must pay yourself through putting 10% of the money I give you into your piggy banks. You will see, even though it may be only five cents, if you do it every time your receive your allowance, that five cents at the end of the month will have accumulated to 20 cents. That 20 cents at the end of the year will be $2.40 I know, $2.40 isn't much, but my Dad knew the principal of instilling a habit to pay ourselves first by saving a portion of whatever we earned from doing our household chores. This was the major lesson. Let's take a second and fast forward to today's earnings. If you were making $10,000/month and saving 10%, you would be saving $1,000/month. Now, at year's end that would be an accumulation of $12,000! Assume those funds were being placed into a tax-deferred account earning 7.00% taxable, the tax-deferred percentage would be 9.72%. Assuming you are in a 28% tax bracket your tax-deferred account earnings for the year would be $13,166.00! However, by age 70 the account accumulation value by that time would equal $490,470.00! That 10% has a whole new meaning now...right? Next, he showed us how to make a budget and the importance of always knowing exactly where your money goes. He said, "NEVER spend more than you can afford." Which meant, if you wanted a piece of candy or toy that was more than the funds you had after putting aside your 10%, then do not even think about buying it! Lastly, the one area our Dad was relentless on, was that no allowance for the next week would be handed to us until we showed him the budget from the last week's allowance and a soft planned budget on the upcoming allowance. We all thought it was brutal, but if we didn't do it, we would have no allowance for the upcoming week. Now, as I sit here telling your about my first allowance experience, all I can think to say is, "Thank you Dad, for teaching us one of the most important financial lessons in life!" This childhood lesson, actually is not 'childlike' at all. It's a principal everyone should adhere to. If you are in a situation from overspending and your liabilities are more than your earnings, then you need to take a step back and take a good honest look at your weaknesses. The bottom line is, "nobody is going to take care of you, but you." Get disciplined 'NOW' to correct your situation. You may have to change a lot in your current lifestyle to achieve a positive financial outcome...and that's what you want, "isn't it?" Start today by applying the simple financial wisdom my Dad passed on to me, Dinah Shores' father passed on to her and I'm sure many of your parents passed on to you to... "Pay yourself first, and don't spend any money unless you have to." Don't be a fool by spending whatever you get. Also, make sure to sit down with a professional financial advisor, whom you trust, so he/she can assist you in making sure your financial goals become a reality with those hard earned dollars you are saving. If it worked for your parents, grandparents, and great grandparents then it certainly will work for you. 1 Comment to PAY YOURSELF FIRST!: Comments RSS NSE & BSE Market Tips on Tuesday, December 20, 2016 12:10 AM The content article is superb the knowledge in this article is beneficial for all. i suggest all the readers to please read this blog.

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