Friday, March 6, 2009

Frugal Friday - Pay yourself!

For Frugal Friday this week, I wanted to talk about the importance of paying yourself. There is a common term in the finance/money world called Pay Yourself First. I say first pay the Lord, then pay yourself! I read a great book several years ago called Money Wise and Spiritually Rich by Dennis Deaton. It is filled with many great insights. One that really stuck with me was the 10 - 10 - 80 rule. Pay the Lord a 10% tithing, pay yourself 10%, then live on the rest.

This is easier said than done!

I was never a saver until I got married. I was working at a credit union and was amazed by what I saw:

Many people who looked "rich" (nice cars, nice clothes, etc.) were deeply in debt and had no savings.

Many people who looked "poor" (drove old cars, dressed modestly) had no debt and huge savings accounts.

I decided that I could save something.

At this time at work, we also had an amazing CEO who encouraged all of us to increase our savings each time we got a raise. When we got a 3% raise, we should increase our savings by 1 1/2%. We would still get a raise and we wouldn't miss that 1 1/2%. I started my 401k contributions at 1% and worked my way up to 6% this way. This same principle could be applied to any savings plan.

While I was working full time, I worked my way up to saving 10% or more with each paycheck.

It was amazing how little I missed this money and how quickly it grew(and is still growing)!

My point with this rant, is that anyone can build a healthy savings a little bit at a time. Here are my tips to make that happen:

++Acknowledge the Lord's hand in your life and pay tithing to thank him. If you aren't religious, donate to your favorite charitable organization.

++Live below your means. It will take a lot of time for us to truly be able to do this...we are still paying off old debt.

++If possible, set up a deduction from your paycheck directly to a credit union or bank. You won't miss what you don't see!

++Cut back on one thing (like eating out or buying coffee or soda each day) and put that amount in your savings.

I also recently heard about this fun site called Feed the Pig with great savings tips, calculators, and games. Check it out for some great ideas.

How about you? What are your savings strategies?


melyn said...

I have an award for you! Thanks for inspiring all of us to live the frugal life. Stop by my blog to get your award.

These are all great ideas. I recently realized the importance of "paying myself first" We definitely want to have an emergency fund built up in case of a real emergency, and if I would have had one years ago I would have saved myself a lot of money and grief. No matter what kind of income you have, make sure and tuck a little away into a savings account.

Lisa said...

Hi Michelle -

Great post! I have been working for over a year now to build an emergency fund and to simultaneously pay down my debt. One thing I just did recently was to change the withholding allowances on my W-4 from two to six. That gives me 80 more dollars every paycheck. I'm putting half of that into my emergency fund and the other half is going towards debt.

I wish that someone would have sat down with me when I was just starting out and talked with me about the importance of savings, living below your means, the risks associated with credit, etc... But I think I'm on the right path, now. Better late than never!

Suz said...

Great ideas! Like the insight on people's appearances. I always thought many people were that way, but didn't have a bankers perspective :) I'd like to think I'm somewhere in between, nicely dressed with some $ in the bank :)

Jerri - Simply Sweet Home said...

Excellent tips and ideas! Thanks for sharing!

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