This week, DD’s Finance columnist Shona Chambers from John McColgan Financial Services explains the ‘pay yourself first’ concept, which means putting away some of your monthly income for savings and investments.
‘Horrid Henry loved money. He loved counting money. He loved holding money. He loved spending money. There was only one problem. Horrid Henry never had any money.’
I stumbled across the book ‘Horrid Henry Gets Rich Quick’ with my daughter a few weeks back and the opening lines above made us both laugh. The premise of the book for those of you who don’t read Horrid Henry, involves Henry organising a jumble sale of sorts and selling off his mother’s perfume and other family belongings in secret!
After reading the book, the line ‘Horrid Henry never had any money’ stayed with me as I frequently hear people say they can’t afford to save because they never have any money, just like Horrid Henry!
Like Horrid Henry, some of the people I have come across haven’t learned the concept of paying yourself first.
My regular readers will be familiar with this concept already as I have written about it in the past.
What paying yourself first really means is that before you do anything else, you set aside a portion of your monthly income for savings and investments. You should do this before you buy groceries, pay the phone bill, or tax the car. This makes saving your top priority, ensuring that you put something away every month. You must also regard those savings as untouchable unless you have a genuine emergency.
Paying yourself first can create significant returns over time. If you start at a young age, and put away even a small portion of your income each month, you can easily accumulate significant investments over the course of your working life.
As children, many of us were given piggy banks and encouraged to save part of our pocket money every week. In many cases, our parents were trying to teach us a regular savings habit at a young age. They wanted us to understand that if we wanted nice things in the future, we had to make sacrifices now to pay for them later.
As people grow older, though, they find it harder to save. There always seems to be something waiting to eat up that last bit of your monthly income. This month, you might need the car serviced for the NCT. Next month, it might be a child’s birthday party. The month after that, you have a wedding to attend. We all know how this feels.
Horrid Henry never had any money because he spent it all as soon as he got it. He hadn’t learned the ‘pay yourself first’ concept. Children’s books like this can be very good at highlighting bad habits. They are a good tool which parents can use to teach their children responsible skills surrounding money and saving. Who really wants to be like Horrid Henry? Who really wants to be in a position where they never have any money?
A good financial advisor like me can help you tailor a savings and investment plan to your income and lifestyle. It doesn’t matter what your job is or how much you earn – what really counts is being disciplined and making ‘you’ your top priority!
Shona Chambers QFA RPA is a Qualified Financial Advisor and Retirement Planning Advisor with John McColgan Financial Services. You can contact Shona on 074 9124366 to make an appointment.Tags: