Saving & Investing - Head Matters

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6. Pay Yourself First

If you pay yourself first, you invest a percentage of your monthly income first, and then adjust your spending to live off the rest. It is not easy, but when you pay yourself first, you are making your financial future a priority. There are several tools you can use to make it easier to pay yourself first:

Payroll deduction – You can have your employer send a portion of each paycheck to a savings account or to the company sponsored retirement plan (401k, 403b, 457) before you even get paid.  This puts your plan on automatic. Before you even get your paycheck, your pre-determined amount has already been sent to your savings or investment account.

Automated Electronic Funds Transfer – You can authorize your bank or credit union to automatically withdraw money from your checking or savings account each month or week and send it to your savings or investment account.  This is another great way to put your investment plan on auto-pilot.  You control the amount and the day of the month or week you want the money transferred and you can usually stop the transfers or change the amount anytime you want.

Write yourself a check – An alternative method is to sit down each month and write a check to your investment account, put it in an envelope, and mail your check.  This takes much more self-discipline than the easier automated methods, but some people like to be more physically involved in the transfer of their money.

Keep it under the mattress – As soon as you have even a small amount saved up in your quarter jar or box in the freezer, you should consider opening an account with a financial institution.  There your money will be safer both from theft and from the dangers of inflation!

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