Badass vs Dumbass
Master your Financial Kung Fu to be one and not the other.
Go to Sifu’s Notebook for 5 Powerful Ways to Implement Paying Yourself First
Primer: Who are Sifu & Ronin
Episode 29: Ronin Excited for Pizza!
Sifu: Ronin, yesterday we discussed exactly why you have to “Pay Yourself First”, but we need to do a quick dive into exactly how to do that. I have the 5 simple steps for you to follow, so you can start right away.
Ronin: Yee-haw! This is the “rubber hits the road” part that I’m into!
Sifu: Heard, Fast ‘n Furious. Your dream of beach living awaits.
Ronin: OMG … Let’s go!
1. Automate Your Savings
Sifu: Ronin, the first step to financial mastery is to automate your savings. It’s like setting up a flawless kata. No thinking, just action.
Ronin: Ah, the master ninja technique! Sneak the cash out of my account before I even notice it. My bank balance will be as surprised as I am. Deadly quick, silent, efficient – expert moves that are no doubt Sifu-approved.
Sifu: To the letter, #1. You’ll never be tempted to spend what you don’t see. Your money will vanish… into savings, not enemy hands.
Ronin: Cool! This is so Art of War. I’m going to make this my winning mindset – just like I do when playing video games. When focused, I never lose!
Sifu: Excellent idea, Xbox Champ. I approve of that too.
Ronin: Giddy-up, boss! I’m at the next level – let’s proceed …
2. Create a Separate Account for Savings
Sifu: Yes, create a separate account for savings. Treat it like a secret dojo. The fewer people who know about it, including yourself, the better.
Ronin: Yes! The ol’ ‘hidden treasure’ technique. Exactly like leaving that final slice of pizza under my bed – away from the hungry bellies of my buds at the party.
Sifu: Ha! Only this time, your hidden treasure won’t mold and smell like regret. Your separate account, set up specifically for “emergency fund” or “investing” or even named “Freedom Fund” will prevent you from spending it frivolously, like on pizza every night.
Ronin: But but but … p-i-z-z-a, my one true love! How will I endure?
Sifu: Your chemical romance with dough frisbee is beyond me, Ronin.
3. Prioritize Investing Over Spending
Sifu: Next is sorting out your priorities: Invest first, spend later. It’s about setting your money to work for you.
Ronin: Work for me? Like hiring minimum wage minions? Oh, so cool. I will finally be a boss!
Sifu: Yes, your are the boss, and your dollars are your staff.
Ronin: Sweet! Can I make them wear tiny 3 piece suits and have briefcases? Or maybe capes. I want them to feel important while they’re out there multiplying.
Sifu: Hahaha. Think of your money like an army of warriors, each coin sent out to grow and bring back more.
Ronin: An army of tiny money ninjas. I like it. Can they do back flips? Because if they’re going to be earning me cash, they might as well look cool doing it. My peeps have style, you know.
Sifu: They’ll be flipping… compounding interest. Master ninjas don’t fool around.
Ronin: Brilliant!
4. Build a Budget that Prioritizes Saving
Sifu: A budget that prioritizes saving and investing is like building a fortress. Every wall is a layer of protection for your financial future.
Ronin: A fortress, huh? So, if I spend too much on coffee, does that mean there’s a breach in the moat? Should I expect dragons at the gate?
Sifu: Ha! More like credit card debt at the door, ready to burn through your income.
Ronin: Yikes. I’ll keep the drawbridge up then. But can I at least have a latte in the fortress? Just one? It’s for morale.
Sifu: As long as the latte fits within the budget. Morale is important, after all. Hee-hee.
5. Reward Yourself for Consistency
Sifu: Lastly, reward your dedication. Discipline deserves recognition, but be mindful of the reward.
Ronin: So no diamond stud ear rings?
Sifu: E-nope, no need for shiny bobbles. Small rewards are enough to keep you motivated.
Ronin: Okay, I’ll settle for… pizza. A full circle, just like my savings journey!
Sifu: Are you sure the budget can accommodate it?
Ronin: Oh yeah, it can! I’ll just automate it… straight from my separate account for pizza emergencies. See? I’m learning, boss!
Sifu: Pffft. Too clever, #1, as always.
Ronin: Now, just have to dig up that last slice of pizza I hid here from yesterday. Should just be underneath this sofa…
Sifu: Too late, Ninja Boy. I found it last night, and scarfed it down – it was delicious! Do you really think my 6th sense couldn’t detect the aroma of delicious mozzarella cheese and fresh basil?
Ronin: Oh man!!!!!
Sifu’s Notebook
5 Powerful Ways to Implement Paying Yourself First
Paying yourself first is one of the most important principles for building financial security and freedom. The idea is simple: prioritize saving and investing for your future before you spend on anything else. By doing this, you ensure you’re always progressing toward your financial goals. But how do you actually implement this strategy? Here are five powerful ways to make sure you consistently pay yourself first:
1. Automate Your Savings
- Why it works: Automation removes the temptation to spend your money elsewhere. When you set up an automatic transfer to your savings or investment accounts, you don’t have to rely on willpower.
- How to do it:
- Set up an automatic transfer from your checking account to a savings or investment account as soon as your paycheck arrives.
- Choose a specific amount (or percentage of your income) to transfer each month.
- Schedule the transfer for the same day you receive your paycheck, so you never see the money in your spending account.
- Best for: Anyone who struggles with impulse spending or inconsistent saving habits.
2. Create a Separate Account for Savings
- Why it works: Keeping your savings in a separate account makes it harder to access, helping you resist the temptation to spend.
- How to do it:
- Open a high-interest savings account or a separate investment account solely for long-term goals.
- Don’t link this account to your debit card or regular checking account to prevent easy withdrawals.
- Consider naming the account something inspiring, like “Future Me Fund” or “Freedom Fund.”
- Best for: Those who want a clear boundary between their savings and spending money.
3. Prioritize Investing Over Spending
- Why it works: Investing allows your money to grow over time, helping you build wealth faster. By investing first, you’re committing to your future financial freedom.
- How to do it:
- Set a specific percentage of your income to go directly into investment accounts (e.g., 10% into a retirement fund or 5% into a brokerage account).
- Use tax-advantaged accounts like a 401(k) to maximize the benefits of saving for retirement. *** Canadians: use RRSP or TFSA ***
- Choose index funds or ETFs for low-cost, diversified investing.
- Best for: Those focused on long-term financial independence or early retirement (FIRE).
4. Build a Budget that Prioritizes Saving
- Why it works: A budget ensures you have a plan for your money. When savings are a priority in your budget, you’re much more likely to stick to paying yourself first.
- How to do it:
- List your savings as the first “expense” in your monthly budget.
- Allocate at least 20% of your income toward saving and investing if possible.
- Use the 50/30/20 rule: 50% for needs, 30% for wants, and 20% for savings.
- Adjust spending categories as needed to ensure your savings goal is always met.
- Best for: People who thrive on structure and like to track their money.
5. Reward Yourself for Consistency
- Why it works: Rewarding yourself for hitting savings milestones helps reinforce good financial habits and keeps you motivated.
- How to do it:
- Set small, achievable savings goals (e.g., saving $1,000 in three months).
- When you reach a goal, celebrate with a non-monetary reward, such as a fun experience or a treat.
- Keep a visual tracker of your progress to stay motivated.
- Best for: Anyone who needs extra motivation to stick with their savings plan.
