It's never too late to be who you might have been.
It’s time to start calling “shotgun” on payday. Tell the debt collectors, the new shoes, friends and family, your Friday night date, even FICA and Uncle Sam to get in line behind YOU. Pay yourself first. Why should you have nothing to show for 40 hours a week, 160 hours a month, and at least 1,920 hours a year of hard labor? Well, believe it or not a vast majority of young adults have exactly that, nothing to show.
The concept of paying yourself first isn’t new, and it can be done quite effortlessly, without debt collectors blowing your phone up, the IRS coming after you like Debo from the movie “Friday,” or having the social life of a slug. It takes the following 3 steps: first, an unwavering approach to getting paid. Secondly, a direct deposit account, whether that’s a bank account, online money market account like INGDirect.com, or an out of home bank account (i.e. a Nike shoe box or bed mattress). Lastly, it takes the discipline not to touch your savings, even though it’s technically yours.
As for the unwavering approach to getting paid, you should view every “paycheck,” whether it’s an employment check, unemployment check, school refund check, tax refund check, alimony check, an “I owe you $20 from last week’s dinner” check, and any other payments to you, as at least 10% from the gross going to “you” for your efforts. Now, when we say “you” we don’t mean your wallet, we mean a savings account in your name. You can establish a direct deposit with any banking institution including online banker’s such as INGDirect.com. We recommend savings accounts over Nike boxes and mattresses since neither of those two insure your money, though the Nike’s will keep you fresh. Also, neither the shoe boxes nor mattress give you money for keeping your money in them, whereas savings accounts do both of these.
You should set the savings account up so that it automatically deducts the determined equivalent of 10% or more from the gross sum deposited into your account regularly. When you take the determined 10% or more from “gross” versus “net,” you are essentially paying yourself first (shotgun), even though taxes, FICA, and other deductions will still be removed from your check before you receive it (see below example). Simply put, you pay yourself first by deducting your determined 10% from the pay for your work (gross), and not the pay that you receive (net). There’s a word for someone who gets paid from your work before you, the worker does, and he/she is called a “pimp.” Lastly, even though it’s your money, it’s more like your future’s money, so don’t add yourself to the list of crooks trying to stop you from stacking.
Example: John Doe makes $500 gross pay per week (his pay for his work), after income taxes at 25%, he nets $375 (the pay that he receives) in his take home check. John should have $50 (the determined 10% of gross) deducted from his check every pay period, instead of $37.50 (10% of net) or $0 (which is no savings). Ultimately, yes, he will be taking home $325 a week instead of $375, but, he will be looking at $2600 saved up at the end of a year, and that’s not including interest, which could be another $25 for leaving it there.
In closing, you will find that living without that 10% isn’t hard at all. You will find yourself making do fine with what is left after all the “pimps” get their pay, including your own “pimp.”
Urban Professor, out. Shotgun!