Tuesday, July 22nd, 2008
Pay Yourself First
I recently read ‘The Richest Man in Babylon’ over the course of 2-3 days and I would suggest this book to anyone who is seeking to build their financial knowledge. It’s a quick read and I think it contains many great lessons, especially for people who are just beginning to develop their fiscal education.
I had read the idea “Pay Yourself First” in several other places, but I didn’t really get the meaning until I read this book.
I used to think that “Pay Yourself First” meant that you should buy yourself something nice, so that you enjoy the fruits of your labor. The reality is that “Pay Yourself First” means that you should save a portion of your paycheck, so that it might eventually be invested and help you to produce more wealth.
Throughout ‘The Richest Man in Babylon’, it is said that “When I ceased to pay out more than nine-tenths of my earnings, I managed to get along just as well. I was not shorter than before. Also, ere long, did coins come to me more easily than before.” - That is to say, if you save 10% of your paycheck, you will only have 90% to spend but you will get along just as well as you did before. Soon enough, your cache of money will begin to build and you will soon have enough to invest.
As an example, you might take your 10% and invest it in silver. Silver will let your money begin to grow and it will also make it a bit more difficult to spend your savings on a whim, since you would need to go to the coin dealer and sell the silver before you could get your hands on the actual dollars.
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