Paying yourself first

Discussion in 'Investor Psychology' started by Xenia IM, 14th Mar, 2015.

  1. Xenia IM

    Xenia IM Property Manager

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    I'm wondering how many people implement this powerful strategy where you habitually put away a portion of your pay check every month or so to go towards investments?

    By pay check I mean any kind of income that lands in your bank account whether you work for someone else or not.

    If so, how much do you put away? 10%, 50%?

    I have been doing this strategy for a long time and now teaching my kids to put away 50% of whatever money they get. One they know that 50% is put away then they can spend the rest of it - they tell me it feels so much better doing it this way.

    Anyone else have a similar strategy that works for them?
     
  2. moyjos

    moyjos Member

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    Being self employed nobody pays super for us ;) so right from the start i have put at least 10% of our turnover into a high interest bank account.

    This stays there untouched until about april/may each year when i go to the account. Then we decide where it can be best utilised. Some years it goes to super, some ars it goes to investment, some years it goes to increase the businesses with a new project.

    So far it has worked for us. We live within our means and i am., confident we will have a comfortable retirement ving the ife we wish to.
     
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  3. Xenia IM

    Xenia IM Property Manager

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    I don't have super either as I have never been employed in Australia.
    If you are self reliant then you need to be more responsible and you need a strategy!

    Well done Moyos
     
  4. Xenia IM

    Xenia IM Property Manager

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    This is a good habit to start kids off.
    Mine don't have enough or are old enough for properties yet but I get them to invest into silver coins - you can purchase a few at a time and it fits in with pocket money.
     
  5. westminster

    westminster P Plate Developer

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    My eldest (15) saves 60% of his pay into a bonus interest savings account for a car, 20% for general savings and 20% to just spend on anything.
     
  6. Xenia IM

    Xenia IM Property Manager

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    I've heard RK saying he uses 20% of his income as living expenses and 80% is invested!
    It makes sense that the percentage of saving/investing increases as income increases.
     
  7. BayView

    BayView Member

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    We have been buying property for investment consciously since 2001, and ever since we have been paying down debt - paying ourself first.

    We haven't bought any IP's as such since 2005, but we bought a business in 2009 - which is an investment of sorts - and built our current PPoR around the same time.

    A huge chunk of our income goes towards paying the business debt, the IP debt and the little bit of loan still outstanding from the PPoR build.
     
  8. kathryn d

    kathryn d Member

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    Since 1982 we had saved 18% pa(minimum) of our income.
     
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  9. Rixter

    Rixter $uper Investor (Retired)

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    100% of our child endowment gets split equally between our kids direct into each their trust accounts automatically from the govt each fortnight.

    We've been doing that ever since kids were born. Their trust accounts have now accumulated into substantial balances.

    Proof that money you don't see you don't miss.
     
  10. GreyGhost

    GreyGhost Member

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    This is fantastic....
    I heard a radio presentation on 3aw this week of a tradie complaining about the proposed increase to the pension age here. Putting that issue aside, he went on to say he always worked running his own business as a bricklayer being self employer or as a subbie. Then went on to say he still has 200k owing on his PPR and only $4k in super....
    Complaining that he won't be able to live..

    I am empathetic towards people's hardships but you are solely responsible for your retirement, and these subbies get paid a higher hourly rate to account for super etc, plus there is a lot of cash money in trade industries, so the fact that a lot of tradies don't put "x" aside for super and or investments annoys me as every other employee has no choice in the matter and now they expect the taxpayer to support them in retirement because of their poor business decisions...

    As an employee I would love to have my super paid to me so I could invest accordingly.. (Too young and not enough yet to warrant a smsf).

    But I was really happy to read MOYOS post.. Good work.
    I
     
  11. Xenia IM

    Xenia IM Property Manager

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    Yeah same
    Great strategy
     
  12. Brian84

    Brian84 Member

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    I thought that tradies and subbies have to pay their super like everyone else.
     
  13. D.T.

    D.T. Property Lookerafterer

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    depends on their business setup. Talk to your accountant.
     
  14. spludgey

    spludgey Member

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    While I quite liked the Napoleon Hill book, I no longer budget, nor pay myself first.
    The reason is that it my IPs are generating around $16k more per year than they're costing me and that I'm quite frugal with my money anyway. My partner and I are able to save over $50k per annum while both being on five figure salaries.
     
  15. tomlemke

    tomlemke Member

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    Best thing i learnt from rich dad poor dad was hold back your money and pay it the day its due :)
     
  16. Rixter

    Rixter $uper Investor (Retired)

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    Exactly and to turbo the effect, use the banks money interest free for up to 55 days.
     
  17. tomlemke

    tomlemke Member

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    use the banks money to expand your portfolio GROWTH AGAINST AVERAGE RETURN :)

    Your the inspiration rixter :D
     
  18. Deltaberry

    Deltaberry Member

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    I would've thought paying yourself is about enjoying life.
     
  19. Rixter

    Rixter $uper Investor (Retired)

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    It sure beats a 40/40 club membership :D
     
  20. Mr. Fabulous

    Mr. Fabulous Thought Criminal

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    This. I initially had the 'pay yourself first' mindset. Then a few years back, I changed it from 'holding back on the things I enjoyed in life' to 'what do I need to do to increase my income to maintain the lifestyle I enjoy today whilst having sufficient funds to secure my future'.

    Essentially, moving from a restrictive mindset (delayed gratification) to an abundance mindset (I can have everything I want today while securing my future).

    Xenia, as someone who is clearly business minded, I'd like to ask you - are you nudging your children into the same ideal - that is, encouraging them to build businesses of their own? This to me, is the way of the future for the youth. Teaching them to build businesses of their own from a very young age, learning how to overcome obstacles, rejection and failure in order to achieve financial success.

    Most people believe that businesses are risky, but I would argue that passive investing, such as property investing is riskier. According to ABS stats, less than 1% of Australians retire on an income of 50K or more. As a business owner myself, I would strongly encourage people to start businesses rather than invest in property. Yes, the chances of the business failing are high, but the rewards (not just financially speaking) are much higher.

    Very few people that have succeeded in business achieved that success the first time around. Most people have started multiple businesses and - this is the key - picked themselves up, dusted themselves off and started again, using the mistakes from previous efforts to build something stronger the next go around.