It’s Very Personal: Pay Yourself First

As a son of immigrant parents, we learned very early the value of money. Needless to say, there was not much of it, so cash flow became essential. Living in such a manner gave me a PHD in life. My parent’s mindset was certainly different as well. They delayed their satisfaction. Mom and Dad patiently saved their money until they had enough to pay cash. Canadian society has changed and we now live in a microwave world where we must have things now. In some cases, it is necessary with computers, which are a much-needed standard in everyday life. Since the early 1980’s, Canada’s household debt burden has exploded as the chart below shows.

For many Canadians who live with low incomes, they need credit in order to survive. For the balance who may have more choices, we will discuss how to be selfish. Not to worry, in this case, worrying about yourself will help you. Let’s start.

First, we should take a hard look at ourselves by asking these questions.

1. WHERE: Where do I spend my money? This force you to analyze where the money goes.
2. WHY: Why am I struggling with cash flow? This question will make you ponder your lifestyle and your choices and will help assist you in seeking alternate choices.
3. HOW: How much in terms of cash flow is my cash going towards debt and can I make better choices?

Once you have answered these questions, we will start our personal attack. The fastest way to get started is to pay the most important person: YOURSELF.

A. Pay yourself. The simplest way is to automate an amount to a separate account. Wherever you bank, open another account and ask them to automatically debit your account and place $100 in the new account. The reason why this is a must is because it will begin your new life of savings with a good habit. Yes, we are saving for a rainy day. What could go wrong? Nothing: it’s YOUR money!

B. Eliminate the debt, starting with the highest credit cards. Store credit cards appear to be the worst. They hover at 27%…yes, this is correct. The rates offered by stores such as The Bay and Home Depot are charging rates similar to pay day loans. Those are close to Mafia rates!

C. A suggestion is to amalgamate into cheaper debt, such as a special credit card sale like 4.99% or another suggestion is a bank line of credit. Then hammer it down as much as you can (again, after paying yourself) until you eliminate it. At the end when the debt is paid, you have more cash flow. Pay yourself a higher amount and spend the difference. Going forward, pay all the items with cash and avoid credit.

Once debt free, put your cash in productive places. Again, pay yourself but save for retirement or buy stocks of companies that charge the high interest, like the banks. Consider investing in yourself like education. Education will make you more marketable, probably make you money and hopefully make you more recession proof, but more importantly, it will give you more choices.

My parents retired with money because they followed these simple selfish rules. They travelled often and lived stress free at retirement. In fact, they even spent 4 months in Florida during the winter months. Everyone is capable of this kind of lifestyle as long as you follow these steps and save appropriately.

Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

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