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Pay Yourself First!
I’m sure most of you have heard this phrase – “Pay yourself first!”
Well, after decades of ignoring this, it’s game on!
Just this past Friday I set up a separate savings account inside my business account and the first 10% of everything that comes in goes into this savings account. (I’ll tell you what I’ll do with that 10% later …. But, first …)
I picked up a book titled, “Profit First”. It’s based upon the age-old “pay yourself first” mantra. As I got further into the book, the author’s strategy gets a little complicated. He’s asking you to set up at least five different checking accounts.
Well, good luck, because this pay yourself first strategy needs to be simple and easy for me.
Here’s MY strategy and this doesn’t mean it should be YOUR strategy.
I have a C Corporation for my business. I just attached this savings account to it. So, money comes in (hopefully) and 10% gets sent to the savings account. I’ll NEVER miss this 10% when it comes to paying operating expenses. AND, as sure as night follows day, if I don’t set it aside, it’s gonna get spent!
I’ll keep it in my business account initially because, if I take it out, I need to withhold payroll taxes. And I want to defer that. An LLC, partnership or a sole proprietorship would be treated differently.
So, once I get $3K to $5K, I’ll take it out as a wage and THEN I’ll withhold payroll taxes. (You gotta pay the man). So, what will I do with this $3K to $5K (minus taxes)?
I’ll put them into Treasuries. And, I’ll just rinse and repeat as good fortune allows me.
https://www.treasurydirect.gov/savings-bonds/i-bonds/
You buy these direct from the government; not through your bank necessarily. Cut out the middle man. Get different maturities; roll them over as they expire. You don’t have to be a genius to do this.
Treasuries are currently paying a little less than 7%. That’s “good” but MY current, personal inflation rate is running between 12%-18% consistently. The inflation that’s publicaly reported (even by Kiplinger) is way off base. And, parking my money in a bank account is like – well, it’s NOTHING!
My car insurance premium jumped about 20%. My dog treats jumped 48%. This has been the Biden way for months now (and it’s not necessarily covid or the Russians). It’s politicians pushing U.S. debt higher and higher and it’s going bonkers. (Don’t get me started here).
I have a big jump on the average person for several reasons. I’ve been strategizing with financial and investing options for decades and, again, it’s MY way and this does not mean it should be YOUR way. But, I buy what I NEED, not what I WANT. (I have 10% of what I want and 1,000% of what I need). I buy EXPERIENCES not THINGS. I try and invest in stuff that’s going UP in value not DOWN.
Let me try and wrap this up.
I often wonder how many smart money people are out there. From my previous tax preparation and investment experience with others – yes, many ARE making their money work for THEM after they have spend years working for their money.
I also know of people who have made a lot of money for decades – yet they don’t have hardly anything – not even memorable experiences. If they have nice things, they may be up to their eyeballs in debt. They live pay check to pay check. They NEVER get ahead. They don’t even THINK about getting ahead. They are just trying to survive from one week to the next.
It’s because they spend everything they get.
It doesn’t have to be that way. But some people will NEVER change.
The few that DO want to do better usually end up a blessing to their family and others.
One more thing, and bless YOUR heart if you’re still with me here, I set up investment accounts for my four granddaughters. The trick is to give each one an equal amount based upon their age. Otherwise, I’ll get blamed for favoring one over the other.
I won’t belabor the problem here but I HAVE found a way to donate to each one’s account – a little bit here, a little bit there – and, based upon their ages, each will be on par as far as the amounts donated over time. But as they increase (or decrease) in value, the funds are not easily controlled. I’ve put them into equities – Microstrategies to be exact and it goes up and down, up and down and I’m buying at different intervals for different girls. But in ten years or so I think things will work out.
I”m telling my step-daughters that the granddaughters will not be able to access their funds until the GD’s reach age 24. Legally, I don’t think I can do this because I think they may legally be able to access their funds at age 18. I’m researching this at some point later on. Whatever …. at least it’s worth a try.
Listen, at some point, I’ll be attracting a few – not many – and they’ll want some help in going from Survival, to Security, to Investing, to being a blessing to others.
I don’t have all the expertise, but I do know how to evaluate associates that do have the expertise.
More on these later …