Simply put, Paying Yourself First is saving money for your future before spending on today's needs, wants and, more importantly, luxuries.
"Do not save what is left after spending, but spend what is left after saving." - Warren Buffet.
Pay Yourself First is perhaps easier said than done!
Although it appears to be simple, not many are doing it. And among those who are doing it, only a few are doing it consistently.
Why is it difficult?
We find it difficult because we are so accustomed to the traditional budgeting approach of saving what is left. Unfortunately, not much is left after spending on our needs, wants and luxuries. And sometimes there is more month left at the end of the money.
It is a comfort zone we keep going back to, with an excuse that bills come first or I don't have enough for today; how can I think about the future?
So what is the solution?
The best and the easiest way to paying yourself is by following the Payday Savings Strategy.
It is deciding how much you can and want to save, automating the savings to coincide with your payday and then spending the rest guilt-free and at your discretion.
How does it worK?
Decide how much you can save.
Go through your last three months bank/credit card/expense statements to understand how much you can save every month.
Expats should aim to save at least 30-50% of their income; if it is difficult, you can start with Elizabeth Warren's 50/30/20 rule to plan your budget and savings.
What is the 50/30/20 rule?
The 50/30/20 rule of thumb is a guide for allocating your income; 50% to needs, 30% to wants, and 20% to savings.
If the 50/30/20 rule is also challenging, Start at least with 10% of your income.
The more you save, the faster you can achieve your financial goals.
Know your Outcome
Knowing your outcome motivates you towards massive and consistent action. Identify your short, medium and long term saving goals and create visual cues helping you to constantly remember them.
Here are some goals you can consider for your self
- Emergency Savings
- Travel & Vacation
- Buying a car
- Saving for a wedding
- Property Investment
- Financial Independence/Retirement
Invest your savings
A penny saved is a penny spent elsewhere!
Create an automatic investment like a SIP or a Regular Savings Plan, or even a recurring deposit in line with the goals identified.
You cannot manage what you don't measure.
Most people do not achieve their goals because they do not have a strategy to measure progress.
It is essential to measure how close to or far from your financial goals at least once in 6 months.
Prioritizing your saving ahead of your expenses makes it easier to achieve your financial goals as an expat; it also helps you make the best out of the tax-free income in UAE.
I can help you automate your savings into a regular savings plan for your medium or long term goals. Let's connect on a discovery call to understand how.