Your Financial Future!

Last night, I was having a conversation with a young brother who recently graduated from college about a year or so ago. We were talking about priorites and what things are more important than others in life, and then the conversation shifted into money ... actually I guided it there.

I asked my young brother, "which bills do you pay first?" and he told me that he paid the ones that have the highest interest. Then I asked him which of his bills had the highest interest, and he told me it was one of his credit cards - which had an overall balance of $600.00. I then asked him, "Are you more interested in yourself & your future or that credit card company & theirs?" and of course he responded that he was more interested in himself.

(WARNING: Here's where my infamous "Jedi Mind-Trick" skills came into play)

I then asked him, "Well, if you pay the bills that have the highest interest and you say you are more 'interested' in yourself & your future than your credit card company, then why aren't you paying yourself before you pay them?" He began to say something, but then he stopped (my "JMT's" rarely if ever fail), and then he asked "what do you mean?"

I then began to explain to him - as I shall now explain to you - that if you really want to climb out of your debt and begin to create, at the very least, a strong financial base; and at best, long lasting wealth - you must learn and live by what has been called "The 1st Rule of Gold." That rule?


PAY YOURSELF FIRST!

The average working person works 40 hours a week. The average percentage of monies taken out of their checks for taxes & Social (in)Security, etc. is somewhere between 30% - 35%. That means for every dollar you make, FICA & friends take thirty to thrity-five cents right off the top - before you even see it! That also means that out of an 8 hour work day, you are working between 2.4 and 2.8 hours to pay FICA & friends.

Pissed off yet? My young brother was!

A great many people who appear to be average next-door type folks are actually millionaires because they follow this simple rule, while a great many people who appear to have all of the floss, gloss, & shine (fancy cars & clothes, big homes) are actually a couple of paychecks away from the soupline because they are not working to support their lives; no ... they are working to support their lifestyles.

You see when you work to support your life, YOU are your 1 client; however, when you are working to support your lifestyle, you are working to pay other people for the life you live. They take your money (and everyone else's) and make more money on top of more money while you're just left with toys that will someday lose their floss and flair.

The rule of thumb in paying yourself first is to take 10% of your gross income from every paycheck and either save it or invest it. Let's take my brother for example. He's making about $42K/yr (gross), which comes out to $1,615.00 per paycheck. If in January, he were to save $161.50 from every paycheck, by the end of the year he would have saved $4,199. If he never got a raise for five years but stuck to this rule, by the end of those five years he would have saved $20,995 (and that's not even taking into consideration the interest he would get if the money were in a savings or investment account).

Right now he's 23 years old. His main concerns are 1 - building good credit, and 2 - being able to buy a home. When I showed him what he would be capable of accomplishing in five years, I then asked him, "how hard of a time do you think you will have securing a loan for a home if you have over $20K - LIQUID?!

Now, before you go yelling about how impossible it is to do that let me share with you a few of my personal philosophies ...

1. As long as I owe you you won't go broke.
2. As long as you are paying your bills your debtors will be satisfied.
3. Your bills are going to always be there until you pay them off.

Imagine having a bill that was $161.50 a month for a year. The only differences between paying off that bill and paying yourself is that you don't send yourself "a friendly reminder" every month, and were you to pay yourself that money as though it were a bill, at the end of the year you would have that money to either enjoy or continue to build upon. In short, you would have the one thing that money does guarantee ... options!

So tell me ... which do you prefer ... if you had someone hounding you to pay them, or just make an effort to pay yourself?

Okay ... let's say your bills are such that it's somewhat difficult for you to put aside 10% of your gross pay (Notice I did not say "can't"). Do you smoke? Do you have Starbucks or Dunkin' Donuts every day at work? Do you have lunch at the company cafeteria or the corner deli every day? How much does that cost over the course of a week? Does it cost at least or around $35 (or more) to fill your gas tank? Better yet ... at the end of every day do you have at least $5.00 in either in your wallet, purse, or bank account?

If the answer to those questions is yes; as I suspect it is for the majority of you, then what's stopping you from paying yourself $5.00 a day? What if you paid yourself instead of the tobacco companies & Starbucks and the pizza or deli man? With gas being over $3.00 a gallon, are you really going to find yourself stranded if you take $5.00 and put that "gallon & some change" in your pocket instead of that of the oil companies coffers?

Let's say that on every payday you arrange to transfer $35 ($5 x 7 days) or $70 ($5 x 14 days) from your checking account into your savings account, or into an Individual Retirement Account (IRA). If you paid yourself just $5.00 a day, in one year's time you will have paid yourself $1,825.00. In five years' time you will have saved $9,125.00. In ten years' time ... $18,250.00. How many years do you have left before you either retire or will be forced out of the workforce? Five, ten, fifteen, twenty?

Take out a calculator and calculate how much money you'd have in your account if you were to save five dollars a day between now and the time you turn 65 ... hell ... 50! Personally, I'm stacking my fives with the goal of not touching them until the year 2020 (which will be the year that I turn 50). Not counting interest ... I'm looking at having my hands on over $21K!

Look, it's your future we're talking about here. I am merely showing you what could be if you just take a little initiative to take care of yourself and your financial future as well as your present responsibilities. Think about how much money you'll spend over the next several years paying off your credit cards & cell phone bills; your rent or mortgage; and whatever other "extracurricular" forms of entertainment you may subscribe to. Five to ten years from now, how much of that money will still be in your pocket?

The only way to insure you have a decent financial future is to start laying down the foundation now, and then commit to keep building upon it. Don't look at those numbers and think they can't be yours. The fact of the matter is they can be yours - as long as you do what's required to get them! On the other hand, if you do nothing now, when then becomes "now" as it always does, you will have nothing but a whole lot of month at the end of the money instead of a whole lot of money at the end of the month!

But hey ... the companies you DO pay, they'll be happy. They'll be fat. They will have the thousands of dollars you and the millions of other Americans pay them with having nothing to look forward to but having to pay them again the following month. Is that the future you want for yourself? If so ... you can have it.

I want my financial future "to be so bright, I gotta wear shades!"

Remember ...
Fortune Favors the Brave!