Running a business is hard work. So when in the heck do you ever get to have some “walking around” money for all the elbow grease you’ve put in? You should be able to at least go out to dinner every now and again, eh?
You’ve just -got- to start paying yourself first.
What’s such the big deal about paying yourself first?
The reason why many people don’t pay themselves first, is because they feel the hot gasping of bills breathing down their necks. “Pay Me Now!” screams the credit cards, student loan, mortgage, and utility bills.
You already know you’re supposed to pay yourself first, but how can you, when these ugly green meanies have their due dates and threatening corporate letters that come when you’re late.
And even if it’s not that bad, you probably just want to be a good person, and take care of your obligations first, before you go live your version of the high life. Right?
Well, it’s actually fairly important spiritually and biologically, to pay yourself first.
Let’s look at the human heart.
If I reach back in my brain, I still remember a leeeetle beeeet of anatomy and physiology. And what I know is this: the very first artery that comes out of the human heart is the coronary artery. Yup, that’s right, the very first place the heart sends blood is to itself.
It’s easy for someone to think they are being heart-centered by taking care of everyone else first, but are they really doing what anyone’s heart would do?
I’ve got more blood than money.
It’s easy to talk about paying yourself first, but when you’ve got a limited amount of cash coming in, and still expect to pay your bills.
Here’s the thing: paying yourself first doesn’t mean being irresponsible. It means acknowledging just what’s true. When money comes in, it comes first to you, and then you distribute it out.
You are the steward of your domain, and you have the responsibility, and the right, to distribute that money. Your bills are calling at your court, and making requests, and of course you want to meet your obligations.
But don’t let yourself be swept away, thinking they are controlling you. You may consciously choose to pay your bills on time, but they aren’t in control, you are.
Which means that you can begin to pay yourself first, before all of those bills.
But what does that really mean?
Here’s my suggestion: whether or not money is tight, don’t pay yourself first by just grabbing some out of your bank account and going on a spending spree. Instead, pay yourself the way you pay your bills: first put the money into a different account, and let it sit there awhile.
Most of what you might spend your money on probably isn’t very visible. Whether it’s a dinner out, or a movie, a massage or a weekend away at the coast, once it’s over, it’s over. Even things you might buy that are physical, like clothes or other toys; you still don’t usually have them all stacked in one place where you can see them all the time.
So, before you spend the money you’ve paid yourself, let it accumulate for just a little bit in a separate account. This accomplishes two things:
- You get to see the money stack up, and you have a real experience of seeing that you pay yourself first, and there’s something to show for it.
- If you do need the money for bills, it’s still there. You can take the money out of that account to stay out of trouble.
This may seem self-defeating. Isn’t it depressing to put money away, only to take it out again? I thought so, too. Until I’d been doing it for a few months.
We’re going to pump you up!
Bit by bit, I noticed that I was taking out ever-so-slightly less than I was putting in. I still had something left over at the end of the month, even if it was only fifty bucks.
Do that several months in a row, and suddenly we had several hundred dollars saved up. A year later, a couple of thousand.
Now, that’s not going to get you an early retirement. But what you are doing is pumping up your pay-yourself-first muscle. Merely having the habit of paying yourself first, means that your savings begin to accumulate.
And when your business finally starts to gain momentum and you start doing well? You won’t be stuck on the treadmill. You see when revenue and income expands, for many people spending unconsciously expands, too, which means that you have nothing left. Crazy, but true.
Merely having the habit of paying yourself first means that your savings begins to accumulate.
So, ready to do the heart-centered thing, and start paying yourself first? Let me show you how.
Keys to Paying Yourself First.
• First visit your bank and set up some accounts.
This goes beyond just simply having a personal account and a business account. Here’s what I suggest:
A personal account that includes a checking account, a savings account, and a “vacation” or “fun” account.
A business account that includes a checking, savings, tax holding, and capital investment account.
These various sub accounts are simply additional savings accounts. Our credit union sets these various sub accounts up for us at no charge, and I can easily move money between any of our accounts online.
• Second, move your money around online.
As money comes in, you do just what the heart does- send blood through different sub-arteries. For every $1 that comes into my bank account:
25% is moved into the tax account;
between 5% and 10% is moved into other accounts.
Once the money is in these various accounts, it is honored in this way, you have a chance to watch it start to grow.
• Third, watch it start to pile up.
You may need to “raid” the different accounts, as we have done at times over the years. That’s fine. Don’t try to “pay yourself back”- because then the ‘pay yourself first’ will just start to feel like another debt you can’t catch up with.
Instead, when you take money out, take the absolute minimum you really need, and leave as much as you can. The next money that comes in, do the same divvying up by percentages.
And don’t forget to have at least a little fun, even if you just take out a relatively small amount to celebrate. In the right spirit a burrito at your favorite tacqueria can feel like a celebration for how you are paying yourself first.
It is a muscle to be built up and a habit to get in to. But just remember that the human heart is the strongest, most enduring muscle in your body. If you lean into your heart, I bet you find the resolution and support to start paying yourself first.
And then you’ll probably start to see those accounts start to grow, in a very healthy manner.
