On of the most highly ignored core mindset in creating personal wealth is paying yourself first. Before i found out about this, i personally had a hard time saving money since i had an ATM and my mommy supplied me all my allowance. It became more like an electronic wallet than a savings account. I really, REALLY wish i knew this back in gradeschool. (Hi Spongebob!)

 Let us take for an example a very hardworking man who climbs up to be a very successful business man. Will he have a good life?

 Let’s also consider party persons. They love to party and enjoy life to the fullest. Will they enjoy life as much in their future?

The answer is neither. While the hardworking businessman goes up the ladder, he relied too much on his high salary. The problem with some people who have a high salary is they depend too much on it. It might not always be the case, but most of the time, the middle class will stay middle class this way because when they get an increase in salary, chances are they also increase their WANTS and just buy more stuff.

What do you want to buy stuff for? When you buy stuff anyway (cha-ching!), you have to maintain stuff (cha-ching!). When stuff gets broken you have to repair stuff (cha-ching!). When stuff gets completely useless you have to replace stuff (cha-ching!). Then just buy more stuff (cha-ching!), and the process repeats itself.Where is all that money draining? Bad instant gratification! Bad!

The party persons in the example above, who does not work for a stable income, will definitely be poor both in health and wealth in old age. However, the businessman who doesn’t have the correct MINDSET and GOAL for building personal wealth will have a hard time too when he gets old and tries to catch up saving. He will stay as a hard working middle class for the rest of his life. Unfortunately this is a problem for most of the working middle class. They go up in salary, go up in buying stuff, but don’t go up really getting wealthy!

The successful businessman forgot to pay himself first!

Remember, you do not get rich just because you earn a high salary! YOU CREATE IT!

WHAT LITTLE YOU DO NOW WILL IMPACT YOU GREATLY IN THE FUTURE.

Remember the Pareto Principle in the last article?

In setting up for building wealth, you need to treat savings as an ongoing expense, a priority expense that is, to pay yourself first!

Here is what most people do with their salaries:

The common trend:

Salary - Expenses = Savings.

Salary minus expenses, instant gratification, etc = Leftover money for saving.

One of the biggest problems about this equation is that savings come only after making the expenses. This is apparently a noncommitment to save. You save only a volatile amount to your savings, and sometimes even none. Unfortunately this is what most people do, and what you are not supposed to do!

PAY YOURSELF FIRST!

The businessman depended too much in his high salary and forgot to pay himself. All of us should be working an effort to set aside money for wealth. The “earliest” and “smallest” thing you can do is pay yourself first.

Salary – Savings = Expenses

Salary, set aside savings first, then expenses.

Here we see how the savings and budget mechanism should truly work. Your savings become one of your priority expenses. You commit a part of your salary to your savings and live within the rest of your net salary.

Ideally, set aside 20% at least, if you can. It does not necessarily have to be exactly 20%, but make sure you commit a DEFINITE AMOUNT monthly. Commit to not to touch your savings!

The good thing about this is you can spend the rest of the money you have while still being able to save and commit a part to your savings.

Now, i hope that anyone who reads this will have an easier time saving for personal wealth building!

Next: Step 4: Budget Allocation Structure

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