Today, our total income itself was insufficient, and Kiyosaki is asking us to divert 100% of it to savings. I follow this concept (in a slightly edited form). For example, let’s say you earn $4,000 each month in take-home pay, after taxes. You pay yourself first by using the first dollars from your earnings and (before spending it on discretionary items) putting those dollars towards your current and future financial goals. Point 2: 100% salary is used to buy assets. Create automatic transfers from checking to savings. Your email address will not be published. This is what is the unedited version of “pay yourself first” concept. What debt? Pay yourself first is a personal finance concept. I greatly admire Kiyosaki for this one concept alone. Not only do financial planners suggest it, but there are plenty of books that prescribe this strategy. Select personalised ads. See how his passive income grows from year 1 to year 11th. 100+ Investment Alternatives, Which Are The Best Ways To Invest Money? What is the Process of Asset Creation? The unedited version of pay yourself first rule of Robert Kiyosaki is TOUGH. But it doesn't have to be that way, especially if you follow this simple strategy: Pay yourself first. Quick question. Best of all, to get start… Raj’s Passive income is 50% of his salary. One of the most-basic tenets of sound investing involves the simple habit of “paying yourself first” – in other words, making your first payment of each month a deposit into your savings account. This series addresses exactly what pay yourself first is and the systems or strategies you can use to set yourself … The phrase. The revelation that we weren’t living up to our potential is what led us into zero-sum budgeting. There are no doubts. Though it was an aberration to what Kiyosaki said about paying oneself first, but today I am happy that at least I started. Paying Yourself First is fundamental to your financial health. Point 4: Passive income is used to pay for all expenses. Store and/or access information on a device. Single = Pay Yourself Amount/2 checks. “First spend, and then whatever is balance is our savings”. Read on to find out the importance of this strategy and how to get started. By paying yourself first, you're almost guaranteed to make sure that money is there when you need it. Pay Yourself First. It's a good idea to try to get that all under control—or to even pay it off completely—before you commit to making a huge amount to your savings every month. Having said that, I am very sure that person who can implement “the pay yourself first concept” will cent percent benefit from it. Know what your expenses are. But this does not mean that we shall start living the life of a pauper. Goal is to “pay oneself” with an idea to accumulate more and moe “income generating assets”. Apply market research to generate audience insights. Natasha Rea May 15, 2018 Bank Leave a Comment. Pay yourself first simply means automatically setting aside a certain percentage of each paycheck to put into savings, before you do anything else with your money. These debts cost us dearly in form of EMIs. If not, you will still learn something new (deeper meaning of money management). Kiyosaki has written a book called Rich Dad Poor Dad where he has explained the need and utility of paying self first. Although you should monitor your account for any unusual activity, try not to watch it constantly and obsess over it. So if total monthly expense is Rs.100,000, the bare minimum expense will be Rs.35,000-50,000 per month. By using the technique, you can truly benefit over time. I was living in a city which was new, and away from my parents. To pay yourself first means simply this: Before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to save. Pay-Yourself-First is a simple concept that paves the way for wealth accumulation or an upcoming need you may have. How much do you have in savings? 1st year – Passive income is 6% of salary income. If you're swimming in credit card and personal loan debt, be practical. And remember, once you develop a routine, you're more likely to continue. “Rs” is a short representation for “Indian Rupee”. That also means they don't have enough for future expenses or luxuries. We were wondering how to get started paying our self with all our other expenses. Financial literacy is the ability to understand and use various financial skills, including personal financial management, budgeting, and investing. So what I followed was another few logical steps. It is only between you-and-you. So I know that it works. Dividend Paying Stocks: Top Indian Stocks [2021]. Undoubtedly, initially you may find it difficult to accept this concept, as most of us are not used to not-spending money.Not-spending can be a bit difficult as we all have idle money (paid to self) in hand, however it is always better to lock the money (by investing). Thanks for posting your comment. Select basic ads. Select personalised content. Yes, in initial days it will pose some difficulty. What is bare minimum expense? The “Pay Yourself First” concept can be applied to more than just money management. Pay yourself first is the very best personal finance concept you need to know. But before that let’s understand the unedited version. The benefits of following this simple money management principle is so huge that it almost feels like a gift of god. Maybe you want to save up for your child's education. The "Pay Yourself First" way of budgeting begins by simply writing down how much you bring home per month. You “pay yourself first” when you contribute a percentage of your income to your retirement plan or savings account each pay period. How it is possible? But remember, you'll have to check your procrastination at the door. The Genius of Pay Yourself First. What's an Individual Retirement Account (IRA)? Money paid to self. You can do so by going to the bank where you hold your checking account. In the pay-yourself-model, saving comes first, not last. How? What Kiyosaki is telling us is, to do the opposite. All it takes is a little dedication and a lot of discipline. You can also follow this simple rule for a year and see its benefits. Put your savings on autopilot. Because without Pay Yourself First, you’ll never reach your ultimate goal of Financial Freedom. After you pay yourself first, look for any unauthorized withdrawals and leave it at that. Let’s see how we spend money, and how Kiyosaki is asking us to do it. The concept of pay yourself first has tremendous powers of making one financially independent. This idea resonates with a lot of people, but many get it wrong. I will quote here what Robert Kiyosaki has said in the book: What is shown in the above infographics? The main advantage of doing that is that you'll have easy access to make transfers or deposits as soon as you get paid. Put the money into your 401 (k), your Roth IRA, or your savings account. It'll save you a lot of hassle and a lot of money in the long run. Make sure you set aside a portion of your income to save. In Chapter 9 of Rich Dad Poor Dad, he has made the reference of it like this…. We know how gold is an investment vehicle. Devote the first hour of your day to your own life goals. Because this concept defines the necessary psychology required in a person wanting to become rich. (I've become so passionate about it ever since that I even authored a book on the subject). Pay Yourself First means that any time you receive money, you should immediately set aside an amount to save. Not-spending becomes even more difficult when one has idle money. Rent vs buy house decision explained with an Online calculator.