A Savings Strategy: Pay Yourself First - Mainstreet Blog
Written by: Lynda Edington | Financial Advisor | Sarnia (London Rd.) branch
You try to set aside money every paycheck for your savings but by the time you pay your bills, buy groceries, gas and go out for dinner a few times it feels like there is nothing left to save. Maybe it’s time to try a different approach.
First, know where your money goes.
Track your spending- whether it is using a spreadsheet, writing it down, or reviewing a few months of bank statements. This activity will help you understand where your money is going and may open your eyes to the real expenses of your day-to-day.
After reviewing your budget, the next step would be to set your financial goals…
Determine what you would like your money to provide for you. This could be the goal of early retirement, a family trip, building your emergency savings, the purchase of a new boat, or car, or other important life goals. Having a budget and measurable goals will help you know where you are going to allocate your paycheck.
Once these two steps are complete, we move into implementing your plan through a strategy we like to call “paying yourself first”.
Essentially, paying yourself first is a reverse budget. Which means you are treating your own savings like it’s a bi-weekly or monthly bill. Instead of saving what you have left, you are saving a specific amount first so that your financial goal can be reached in a set time frame.
For example, if you bring home $4,000.00 monthly, automatically save 15% ($600) towards savings. This will leave you $3,400.00 to pay your bills and make your goals a reality. The strategy of savings makes saving easy because you are no longer spending any time figuring out if you have any money left to save. Instead, you can be confident you are getting closer to your goal – as long as you stick to your budget.
We realize that paying yourself first or setting up a reverse budget may be tough, so we are here to help! The expertise of a Mainstreet Advisor can help get you on track and closer to where you need to be. We can meet with you to review your different goals, how to make them work best for you, and how investing may make them achievable sooner than you think. We can also help you set-up automatic withdrawals from your account every pay going to your savings so your pay yourself first savings happens automatically.
To get started reach out to a Financial Advisor at Mainstreet Credit Union today by calling us or book a meeting online.