An article that talks about ? And also talks about lowering taxes? I'm all over it! Plus, it's written by David Bach, author of , one of my recommended personal finance books. Here's a summary of his "pay yourself first" thoughts:
Most people pay everyone else first -- taxman, landlord, credit-card company, and so on. They try and budget every week, month, and year hoping that if they're careful they'll have some money left over. This is absolutely, positively backwards. And because of it over 70 percent of Americans continue to live paycheck to paycheck regardless of increasing incomes. We make more. We spend more. And at the end of the day we're still broke. Are you tired of this game?
"Pay yourself first" means just what it says: When you earn a dollar, the first person you pay is you. Sounds simple, but most people don't do it.
Most people think they have to pay taxes first. Is this correct? Nope. Here's his thought:
You have a right to legally avoid federal and state taxes on the money you earn. You can legally pay yourself first by simply using a retirement account. There are many different types, including 401(k) and 403(b) plans, IRAs and SEP IRAs. The one thing that makes all of these "pay yourself first" accounts is that the money you put in them is either pre-tax or tax deductible.
And using these investment vehicles, you can pile you a significant net worth:
Your goal should be to save one hour a day of your income.
Let's assume you make $50,000 a year. That's about $2,000 every two weeks. If you invested $200 every two weeks for 35 years in a retirement account that earned an annual return of 10 percent what would you have? Quite a pot of gold: $1,678,293.78.
Here's the bottom line:
The point is you can make a lot by setting up a retirement account that pays you before Uncle Sam takes his cut.
Simply great advice all the way around. It's stuff like this that makes so valuable -- an investment with an almost infinite return.
"Pay yourself first" is also one of the key messages in another of my favorite personal finance books, . It's a cheap, quick read that will really help you grow your net worth. If you don't have a copy, get one today, read it, study it, apply it and you'll be on your way to a better bottom line.