Pay Yourself First

What does the term "Pay Yourself First" mean to you? I was probably in my 20's the first time I heard that phrase and of course I thought that meant treat yourself to a mani & a pedi or buy a new pair of earrings before you did something boring with your paycheck, like paying bills. What it actually means, according to most personal financing experts, is that you automatically put part of your paycheck into savings before you ever touch your paycheck, so you won't be tempted to buy those earrings.

The most common way to automatically save is a 401K plan. I am fortunate that my company still offers a dollar for dollar match up to the first 6% of your income saved. And that's exactly what I save-6%. However, according to a web tool that my company offers that allows one to calculate how much is needed to save in order to retire, I find I am very short. Even if I saved 15%, which there is no way I can afford at this time, I will have not nearly enough to retire in 17-20 years. Its a sobering thought.

There are so many demands on ones paycheck. Long before I see a penny I have 401K deductions, Health, dental, and vision insurance premiums, $231 from each check goes to an HSA (Health Savings Account), and that's all pre tax deductions. Then of course Federal and State Income Taxes, FICA (Social Security), and Medicaid. Then comes Long Term Disability insurance, Accidental Death insurance, and a loan re payment from my 401K plan. Its a wonder I have any take home pay! And then come the bills; mortgage, car payment, utilities, and credit cards, as well as money for gas and groceries. And finally I need to put some aside for emergencies, major expenses, and having some fun. I have to admit, writing it all down is depressing.

But writing it down is what I need to do if I am going to cut expenses, and make saving a priority I need to keep this subject at the forefront of my brain.