The Path to Financial Success: Step# 1

Pay Yourself First!

This is very important. You are your first source of capital to generate investment income. For most of us, our capital comes mostly from some form of active income such as our salary, allowances, bonuses and other sidelines. You need to set aside a portion of this amount to be dedicated to savings that will generate investment income.

However, we also have other sources of capital. Our intellectual abilities could serve as our capital and should not be ignored. Remember that intellectual capital is just as important as our savings. Bill Gates, for example, only started out with his brains and now, being the founder of Microsoft, he is constantly crowned by Forbes as the richest man today. You might even be using his “Windows” operating system while reading this article! There are a lot of entrepreneurs today that only started out with their brains and look at where it got them today. Entrepreneurs starting with simple ideas that end up as multi-billion dollar ventures.

If you want financial freedom then you should start saving NOW! This is very critical because time is very important in the journey to financial success. Let me give you a tip, set aside a portion of your salary as savings instead of saving what’s left of you money. This way you can start building up your capital.

Remember:
Income – Expenses = Savings (IS A BIG MISTAKE)

Income – Savings = Expenses (IS WHAT IT SHOULD BE)

Never forget that savings in itself is an expense however it is an expense that pays for your future! Most of us look at our salary as ours to spend for whatever we want. However we should actually put aside a part of our salary for our future.

It is very important that you pay yourself first and this should be a priority. Paying yourself in this instance means compensating yourself for the “use” of an income-generating asset, which is yourself.

Thus your income must first be reduced by your savings needs and what is left after is then available for living expenses and wants.

If you really look at your expenses, you will find out that most of your expenses are actually optional. If you immediately set aside 20% of your income for savings you will find out that you really can live with a budget of 80% your total income! This is because a tiny portion of our brain adapts to the circumstances once the money is actually put away. I know, it might be hard at first so start small! Save 5% of you salary this year, 10% on the next year until you reach your 20% mark!

Remember pay yourself first and start saving now and you're on your way to financial success! Stay tune here at Compound Savings Interest for more Finance Tips!