What is the most important financial decision that you'll ever make in your entire life?
It's simple: Pay Yourself First.
All rich people do this. Are you?
Most people unfortunately live the opposite. They pay themselves LAST. When income comes in, it immediately goes to pay off their bills, debt and lifestyle expenses. As a result, people have little or no money left over at the end of the month. These are the people that live pay check to pay check, never getting ahead.
Watch the video below and learn why this habit is so important.
How Much To Pay Yourself?
All of the finance books and guru's recommend to pay yourself at least 10% of whatever you earn.
By paying yourself at least 10% of whatever you earn, putting it into some form of investment, over the long-haul you'll tap into the power of compounding.
Albert Einstein said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn't … pays it.”
I've been doing this since I was 18 years old, ever since I read the book The Wealthy Barber.
I started off just putting $25/month into a mutual fund. Then eventually it grew as my income expanded.
I did this even when I was in debt and didn't have any money to spare.
While I'm glad I started young, I always wish that I did MORE when I was younger. Thankfully, by the time I was 20 I was putting in $100-200/month… but again, I always wish I had more. The sooner you can get started with this, the more powerful affects of compounding you will benefit from.
Sir John Templeton, one of the top financial traders of all time, was paying himself 50% during his early years. He's since passed away, but he became a multi-billionaire and one of the richest men in the world as a result.
Whatever you have to do… find a way to pay yourself first!
I don't care if you have to cut back on some lifestyle expenses. Stop eating out. Cut your cable bill. Sell your car and take the bus. Do whatever it takes to make it habit, as it will take you to where you want to be long-term.
The Power Of Compound Interest
There's countless stories and graphs that illustrate the power of this. I found an excellent infographic that shares the benefits of compound interest over the long-haul.
Illustrated above you'll see that at age 25, if you save just $100 per month, by the time you're 65 you'll have accumulated $156,122. The infographic takes into consideration the rate of return of 6%, inflation rate at 3.1% and the tax rate being 15%.
You'll see that the longer and older you wait, the less benefits you get from compounding. That's why it's important to start as soon as possible. Today!
Where Should I Put My Money?
That's an important question and I can't answer it specifically for you.
There's several options, but stocks or mutual funds are one of the best bets. In Tony Robbins new book, Money: Master The Game, he talks about buying an index fund, which is owning a piece of all the top companies in the stock market (without paying the mutual fund fees).
It might be worthwhile to visit your bank or an expert that can advise you on this, but the most important thing is to GET STARTED.