How to Pay Yourself First

You’ve heard it a million times… “pay yourself first”. And every time you hear it you think “I can barely pay my bills, how can I afford to pay myself first?”

Many people never start paying themselves first, because they are too concerned that they won’t have enough to pay the bills if they put any money in savings.

Well, this is one of those things that you just have to do, even if you don’t think you can afford to.

So how do you pay yourself first when you are worried that you won’t be able to pay the bills? Here’s how…

1. Setup a savings account that you have easy access to. This can be a savings account with your current bank, or an online savings account (you will probably earn more interest with an online bank).

2. Transfer 5 or 10 percent of your income every time you get paid to your new savings account.

3. Eventually, you will get used to saving this money and you won’t even miss it in your checking account. But until then, if you find that you’re short on funds and can’t pay your bills, transfer some of that money back from the savings account to your checking account to pay your bills.

This strategy may be hard at first, especially if you find you have to raid your savings every month to cover bills. But eventually, you’ll find that you are able to save money without dipping into your savings account each month. When that happens, you will already be in the habit of saving, so it will be no big deal to pay yourself first.

Do Something Every Day to Increase Your Income

If you’re self employed, you likely experience income slumps. It may be because your business is cyclical (being a tax professional, I am extremely busy the first 4 months of the year, but then things slow down drastically during the summer months), or it may be because the economy is slow, or it may be just because you haven’t done any marketing in a while.

Whatever the reason, I like to take some time to brainstorm about ways I can increase my income. And when things are really slow, I pull that list out and try to do something every day to get my income back up to where I want it to be.

So… here’s a few things I do to boost my income when I’m in a slump:

• the most obvious is to complete any client work I have in progress (usually because I’m waiting on info from the client, so time to nag… I mean contact the client for that info!)
• contact potential clients to see if I can answer any questions or objections they may have
• contact old clients I haven’t heard from in a while… time for an annual review?
• write an article or two and post to article directories
• add new products or services to the product funnel
• post to blog (stock up on posts for a while so you don’t get behind when business picks up)
• create a Squidoo lens or Hub page
• hold a teleclass
• hire someone to help out with the menial tasks so you can focus on billable hours or income generating projects
• create a system in your business to make you more efficient
• optimize your blog/website for keywords to increase traffic
• answer questions at Yahoo! Answers or on related forums

These are just a few ideas (in no specific order). What do you do when you’re in an income slump to increase your business?

Visualizing Your Goals With Feeling

In my Living Debt Free ebook, I suggest that readers visualize their goals to help them stay motivated on their journey to getting out of debt.

Joan Sotkin of Prosperity Place takes this a step further, and says visualizing with feelings is a more powerful way to change your money thoughts and will help you achieve your goals faster.

For more about visualizing your goals, check out Prosperity Quick Tip: Visualizing with Feelings.

An Exercise to Reduce Financial Anxiety

A few years ago I learned an exercise that is designed to de-clutter your mind.  While this exercise was really created to be used when you have too many things to do, I found it to be a great stress reliever, and use it anytime I’m worried about something and need to reduce my stress about whatever is bothering me.

Given the state of the economy and the stock market, I thought it would be a great idea to share this exercise with you to help reduce any stress you may have related to your finances.

To get started… For 15 minutes, write down everything that’s on your mind.  In this case, I want you to focus on writing down everything that’s on your mind about your finances.  It doesn’t matter if you use pen and paper for this exercise, or use a computer (I use a computerized journal).  The purpose is to write down everything that is on your mind about your finances.  Keep writing until you run out of things to write.

Continue Reading An Exercise to Reduce Financial Anxiety

Building an Emergency Kit

You’ve heard about the importance of having an emergency fund, but Erin Burt at Kiplinger.com takes this concept further in her Essential Emergency Kit article.

The goal of an emergency fund is to have funds set aside in case you lose your job, have unexpected medical expenses, or have some other short term financial need that is unexpected.

The emergency kit is a complete emergency strategy.  The emergency kit is similar to the emergency fund in that it is protecting you against a job loss, unexpected medical expenses, etc., but the emergency kit is also intented to make sure you’re ready for bigger emergencies, like a natural disaster, or even worse, a man-made disaster.

How is an emergency kit different than an emergency fund?  An emergency kit includes:

• an emergency fund to cover three months of living expenses (start with $1,000 if 3 months of living expenses is too big of a goal)
• making sure your car & home owners insurance is up to date
• updating your life and disability insurance to protect your family in the event of your death or disability
• making your wishes known by updating your will, healthcare directive and other estate planning documents
• creating a survival kit with food, water, and supplies
• creating an evacuation strategy in the event of fire, flood or other natural disasters

These are just a few of the items Erin discusses in her emergency kit.  To learn more, please read the full article, Your Essential Emergency Kit.

Your Essential Emergency Kit - Kiplinger.com.

Instead of Saying “I Can’t Afford That…”

…why not ask “how can I afford that”?

While browsing the The Carnival of 20-Somethings Finance, I saw a post called Tori Spelling - Unsung Financial Hero? that caught my attention.

If you like reality shows (me, not so much, but I actually caught part of this episode on one of my ‘unable to sleep’ nights), you may be familiar with Tori and Dean - Home Sweet Hollywood.  On a recent episode, Tori and Dean were looking at new houses to buy, and they were looking at one that was twice their budget.

While that in itself isn’t very remarkable, what was remarkable was Tori’s response to her husband’s objections that they couldn’t afford the house.

Instead of saying “we can’t afford it”, Tori’s attitude was “how can we afford this house?”.  She was willing to start a business - or even two - to be able to afford this house, even while 9 months pregnant!

In my financial planning business I work with a lot of people who are in debt.  I’d like to take Tori’s “how can we afford this house?” attitude and challenge those of you who are in debt, to consider…

Instead of asking, “how can I get out of this debt hole I’ve dug for myself?”, ask yourself, “how can I make more money?”.

By focusing on how to make more money, you’ll have a more positive attitude towards your money, and you’ll probably pay your debts off much faster than if you took a negative approach and spent your time worrying all the time.

What do you think?