Friday, October 20, 2006
Before you pay your bills or buy things for yourself, PAY YOUR SELF FIRST!
Put some money (I'd say around 10% is a good amount) somewhere you won't touch it for other things. Ideally you should have it put there automatically. Eventually you'll have a good portion of money sitting there. It should be some sort of interest bearing account, either a high yield savings account, a money market account, or a retirement account (401k or IRA).
I am not yet receiving regular pay checks, so I have not yet implemented this myself. BUT, when I do, I plan to automatically divert 10% of my incoming pay check to my Fidelity account. Fidelity currently has around 5% interest on money you have yet to invest in stocks or bonds. So putting the money there automatically earns about the same interest as if I kept it in my Citibank account. The difference is that I never think of it as part of my available money so I won't spend it. Once it shows up at Fidelity I think of it as already invested and there is no reason to move money out of Fidelity since I still have money at Citibank.
I think mayking it automatic is important pyschologically.