From the time I was a kid, I can remember my Uncle Jerry telling me that the first rule of finance is, “Pay yourself first.” Emphasized by, “A ditch digger can be rich if he adheres to rule number one.”
Years later, while attending premarital Catholic classes the priest asked “Who knows the first rule of finance?”
One boy in the front of the class raised his hand before the question could leave the priest’s mouth.
“Pay yourself first,” he told the other 30 attendees.
The priest shook his head and asked the room if they knew the correct answer.
That boy’s jaw hit the ground when the whole room, in unison, chanted “tithe.”
That boy, is now my husband, and he promptly, without whispering, announced that the priest was wrong and if you tithed without paying yourself first, you would become a charity case.
I love this story of my future husband because it shows how few people believe that paying yourself is important. However, it is the cornerstone of our wealth building strategy. It is what got us where we are today.
As hard as it sounds to pay yourself first, it’s relatively easy if you automate it.
For some, that could mean auto transferring funds to a savings account or cash under a mattress. For us, it means automatically investing in stock (equities). This is because we believe you have to have appreciating assets to outrun inflation and truly gain wealth.
You can do this for as little as $50 a month through direct stock purchase programs (DSPP). We prefer DSPPs coupled with dividend reinvestment plans (DRIPS). This is because those companies pay you a percent of their earnings, which we automatically reinvest and compounds over time. Computershare, Broadridge, and many other firms offer these programs.
We started these in 2009 with Disney and Pepsi at $50 a month each. In 2013, they bought us our second rental home ,which cash flows $800 a month.
Let me tell you, we did not easily have $100 a month because we were paying out of pocket for our Master’s programs, we had a primary house, we had 2 car notes (not the smartest decision), and we loved to go to Friday’s and Raiford’s on the weekends.
Setting aside $4800 over a 4 year period though, bought us $9600 a year in income.
The first rule of finance is, “Pay yourself first.”
To pay yourself first, you have to spend less than you make. Click here to see my thoughts on that.
Send me a note and let me know how you pay yourself first!