So you hear a lot of people say to pay yourself first, before paying the bills or anything else. How much does one pay themselves? What percent of income? I never really understood that saying.
Thanks in advance!
10% is the common rule here. Which means set aside 10% in savings accounts (all forms, investments, etc).
The way the questions reads, I thought you meant how much do you actually pay yourself out of your business and re-invest the profits to the business. This is something I struggle with too. I like to put all of my proceeds into my personal account and role with it each month (paying "myself" first the 10% too").
If you want to live a high end middle class lifestyle off of your wages you will save less.
A brand new Lexus, and a tablecloth dinner out for you and the Mrs. with wine and all the fixings every Friday and a maid once a week will eat up a lot of what you could save.
Cutting your lifestyle down to the basics for a while will let you sock more away.
Are we talking saving for retirement/401k, Roth, real estate holdings, real estate savings?
My belief is; to pay yourself first is to make sure you are saving for retirement before you use your money for all the silly things that you do not need.
Many a time, since I pay myself first I didn’t have money left at the end of the month to buy what I really “needed” (wanted).
I max out my 401k directly from my paychecks, I also have money going to Vanguard VTSAX from every paycheck, and another fund that gets money directly for future real estate deals. None of this money ever sees my checking account. Hence, I have paid myself first.
When I read the words in Rich Dad Poor Dad to "Pay yourself first" it changed my whole perspective. I pretty much save to invest 50% of my monthly income, every month. I of course make sure my bills are covered, but even with bills/rent, i can save 50% of my monthly income every month, which I have been doing. I put that money away immediately, before anything else. I have not really had to cut my life back much at all. I still enjoy nearly everything I enjoyed previously. I am just no longer buying unnecessary things. I live near San Francisco and work in San Francisco and do not even make 6 figures. I say this just to show it is possible, how bad do you want it. There are still a couple big expenses I could cut back on also which would allow me to save/invest a lot more. Using this method I was able to pay off $30k in debt this year(which is pretty much all of my debt) and save $12,500. So with no debt, I am expecting to be able to save to invest a good $30-$50k next year, which is when I intend to purchase my first investment property. Some months i fell off track and it really sets you back, but usually I have been pretty good about not spending unnecessarily.
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