Pay yourself first
STUDENT writes:
_______________________
MONEY PROF responds:
Not true, don't do women's discrimination.
Males have the same problem, just different items. Instead of more shoes, its chrome air intakes for their hot car. etc. A male relative by marriage, bought a $100,000 oversized truck.
YES, you guessed it, ON CREDIT!!!!!!!! Had it for a while and when he realized he couldn't afford it sold it for a big loss. He owed a lot more than he sold it for.
The answer is "pay yourself first". In other words you save first, then spend. For it to work good it should be automatic. If possible payroll deducted to say your checking acct., then a set amount automatically transferred to your brokerage acct. My suggestion is this amount should be 10% of your earnings before taxes.
On future discussions we need to get into the two separate checking accts. theory , you probably can wait on that until you have set bills.
This is an important part if you have bills, rent, electric, etc. If so, HIGHLY recommend two checking accts. Will discuss this with you on future emails.
BTW: there is nothing wrong with spending for items you enjoy, clothes etc., JUST SO you "saved to spend".
My personal spending first , and nothing left to save later story:
When I was 18 yrs old I made real good money (for the age) as a meat cutter in NYC. In today's dollars probably $600+ a week. My roommate was a mason in construction and made about $750+ a week. We were so broke that we couldn't get through to the next paycheck. Couldn't piss the money away fast enough in bars and restaurants etc. I would borrow from roommate, on Fri., he would borrow from me on Tues. ( yes, every week!!!!!!!) Had nothing to show for it, went out partying 7 days a week. Now here is a really dumb one: I thought the problem was that I needed to earn more money. :( So worked construction a few times on my day off to earn more money.
By 19 yrs old fortunately cut down the partying, and was on a budget.
By 20 was saving for down payment on a house and bought the house at 20 1/2 ( lied on age to bank :). My point is its NOT what you earn as much as what you spend compared to what you earn. ( obviously over X dollars, but that x is lower than you might think).
If you're interested to pursue the pay yourself first program. You will need to set up a brokerage acct. for an IRA.
I'll get it started for you, email me SS#, address you want mail sent to, date of birth, and phone#. You can open the acct for any amount of money, like $5.00. For automatic transfers I think the minimum is $50, but not a problem as you can adjust the time. For example every other week, or once a month. For investing the minimum is $250, but after that then $50 increments. You don't need the $250 up front, this just means you need to get up to $250 in the acct. before it can be invested.
"Probably being a woman this is going to be much harder for me. I have a horrible spending habbit that I need to cut out of my life. I work really hard but at the same time the money"
_______________________
MONEY PROF responds:
Not true, don't do women's discrimination.
Males have the same problem, just different items. Instead of more shoes, its chrome air intakes for their hot car. etc. A male relative by marriage, bought a $100,000 oversized truck.
YES, you guessed it, ON CREDIT!!!!!!!! Had it for a while and when he realized he couldn't afford it sold it for a big loss. He owed a lot more than he sold it for.
The answer is "pay yourself first". In other words you save first, then spend. For it to work good it should be automatic. If possible payroll deducted to say your checking acct., then a set amount automatically transferred to your brokerage acct. My suggestion is this amount should be 10% of your earnings before taxes.
On future discussions we need to get into the two separate checking accts. theory , you probably can wait on that until you have set bills.
This is an important part if you have bills, rent, electric, etc. If so, HIGHLY recommend two checking accts. Will discuss this with you on future emails.
BTW: there is nothing wrong with spending for items you enjoy, clothes etc., JUST SO you "saved to spend".
My personal spending first , and nothing left to save later story:
When I was 18 yrs old I made real good money (for the age) as a meat cutter in NYC. In today's dollars probably $600+ a week. My roommate was a mason in construction and made about $750+ a week. We were so broke that we couldn't get through to the next paycheck. Couldn't piss the money away fast enough in bars and restaurants etc. I would borrow from roommate, on Fri., he would borrow from me on Tues. ( yes, every week!!!!!!!) Had nothing to show for it, went out partying 7 days a week. Now here is a really dumb one: I thought the problem was that I needed to earn more money. :( So worked construction a few times on my day off to earn more money.
By 19 yrs old fortunately cut down the partying, and was on a budget.
By 20 was saving for down payment on a house and bought the house at 20 1/2 ( lied on age to bank :). My point is its NOT what you earn as much as what you spend compared to what you earn. ( obviously over X dollars, but that x is lower than you might think).
If you're interested to pursue the pay yourself first program. You will need to set up a brokerage acct. for an IRA.
I'll get it started for you, email me SS#, address you want mail sent to, date of birth, and phone#. You can open the acct for any amount of money, like $5.00. For automatic transfers I think the minimum is $50, but not a problem as you can adjust the time. For example every other week, or once a month. For investing the minimum is $250, but after that then $50 increments. You don't need the $250 up front, this just means you need to get up to $250 in the acct. before it can be invested.
posted by MoneyProf at Sunday, February 20, 2005
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