Pay Yourself First

Jack Canfield's Success Principle #58

We're in the home stretch...only seven more days remaining in our discussion of Jack Canfield's Success Principles. Today, we learn about the importance of paying ourselves before paying anyone else, because our financial success contributes to our ability to thrive.

Start saving early.
Albert Einstein once said, Compound interest is the eighth natural wonder of the world and the most perfect thing I have ever encountered. That's quite a statement coming from the genius who discovered the law of relativity.

Jesus taught a parable about the kingdom of heaven in Matthew chapter 15, comparing the outcome of our Christian service to that of financial guardians of his day who invested their master's money. It clearly shows that the wise servant invests his money to earn interest, and the foolish servant buries his in the earth. Even in Jesus' time, people understood the power of compounding interest.

The sooner we start saving, the easier it is to become wealthy. If Mary invests $150 per month from age 25 to 35 and then stops, she will have invested $18,000, which will grow at 8% interest to $283,385 by the time she retires at age 65.

By contrast, if Tom invests $150 per month from age 35 to 65, he will have invested $54,000 and will only earn $220,233 by the time he retires at 65. The sooner we start saving, the greater our compounded interest will be.

Make saving a priority.
The goal of saving is to become financially independent. This means that we could live off of nothing but the interest we earn on our investments. By methodically saving 10 to 15% of our income, we can discipline ourselves to begin building our fortune. We also force ourselves to earn more if we want to do or have more.

If we can't find ways to cut the budget so that we can afford to save 10 to 15%, we can start with as little as 1% of our income. The habit of saving develops each time we practice it. Eventually, we'll be able to save more if we work at it.

Become an automatic millionaire.
Few people are able to discipline themselves to save without automatic deductions. We can arrange for our employers to automatically place money from our paychecks into our savings accounts. If we arrange to have our money placed into a retirement fund, we don't have to pay taxes right now on this savings.

Some companies, like the hospital Joe works for, offer matching contributions. If Joe puts in 10% of his income each pay period, the hospital puts in 5%. Get on board with this today if your company offers it. It's free money being given away to people who are smart enough to grab it!

Follow the 50/50 law.
John Demartini is a chiropractor who now conducts seminars on building wealth. He created the 50/50 law, which means that we never spend more than we save. I think this is a brilliant idea.

Let's say that I want to buy Joe a boat for his birthday. It costs $10,000. If I can't put $10,000 into savings first, and then set aside another $10,000 for the boat, I don't buy it. The key here is that we don't raise our lifestyle until we have earned the right to have it.

Build assets, not liabilities.
Robert Kyosaki wrote the book, Rich Dad, Poor Dad. Our son recommended it to us several years ago, and we were impressed with the insights of the author. One of his most important points is that we must build assets, not liabilities.

One way to think about this is to consider the purchase of a home. Many people believe this is an asset, but it's not, according to Kyosaki. An asset is something that puts money into your pocket. I don't know about your house, but mine sure takes out a lot more than it puts in!

Assets that put money into our pockets are things, such as investment real estate (rental properties), small businesses, stocks, bonds, gold, and so on. If we want to become rich, we put our money in these things first. Only when they are generating enough income to support us and our purchases do we buy things such as homes and cars.

Hire a financial planner.
After our nest egg begins to grow, it's important to hire a financial planner to help us invest it. To illustrate the importance of investing our money and not just stashing it under the mattress, Jack tells the story of Oseola McCarty of Hattiesburg, Mississippi.

Oseola dropped out of school in the sixth grade to wash and iron other people's clothes. For 75 years, she worked and saved. In 1995, she donated $150,000 of her $250,000 savings to the University of Southern Mississippi. If Oseola had invested her $50,000 in 1965 to earn about 10% interest per year, she would have had just shy of $1 million--four times what she saved!

Protect what's yours.
In this day and age when people are swift to sue, it's important to protect our assets with adequate insurance, particularly if we run a small business. I also believe that disability insurance is critical, because I didn't have any when I was running a small business a number of years ago. Without insurance, we lost our shirts when I became too ill to work.

If we have a lot of wealth that we're bringing into a marriage, it's important to get a prenuptial agreement. These days, divorce rates are so high, the risk is too great to trust that it won't happen. By protecting our assets, we also discover whether or not people love us for who we are, and not for our money.

If you've never had a lot of money, this may be difficult to understand. During my first marriage, a lot of people wanted to be my friend, because they liked hanging out with someone who was wealthy. Interestingly, when I got divorced and most of the money remained with my first husband, all of those friends vanished.

Today's Challenge
There are many good points in today's lesson, and it may take you a while to implement all of them. Start by setting up an automatic deduction from your paycheck into a savings account. If your employer offers matching contributions, invest as much as you can to maximize the free money that's waiting for you.

Jack Canfield, America's #1 Success Coach, is founder of the billion-dollar book brand Chicken Soup for the Soul© and a leading authority on Peak Performance and Life Success. If you're ready to jump-start your life, make more money, and have more fun and joy in all that you do, get your FREE success tips from Jack Canfield now at: www.FreeSuccessStrategies.com