Can you bear with me for one more labored metaphor? As I’ve mentioned a few times already, I’m in the midst of a successful fitness program. I’ve lost 20 pounds since the beginning of the year, and, more importantly, I’m exercising every day.
This morning, for example, I pedaled 8-1/2 miles to my Crossfit gym; spent an hour practicing skills, doing body rows (pull-ups for people who can’t do pull-ups), and lifting weights (front squats); and then I biked 10-1/2 miles home. According to my handy body bug, I burned 1500 calories by 9 a.m., which means that I can spend the rest of the day blogging, working in the yard, and learning French, secure in the knowledge that I’ve already done 2-1/2 hours of exercise.
This, my friends, is essentially the routine I’ve established lately. I get my exercise in first thing so that I don’t have it looming over me for the rest of the day. I don’t want to find myself eating dinner while wondering when I’m going to find time for a one-hour run. When that happens, I feel guilty and often don’t follow through. (And yes, I realize I’m lucky to have a flexible schedule that lets me fit in an hour or two of exercise every morning.)
Pay yourself first
One of the reasons my financial life has been humming along so nicely lately — except when I forget to pay my bills — is that I’ve been applying similar principles to my budget over the past few years.
It used to be that when I got paid, I’d pay my bills, then use any leftover money to buy stuff I wanted today instead of setting anything aside for the future. In fact, I never saved anything. Despite earning around the median income for men in the U.S., I never seemed to have money left over at the end of the month. (I didn’t even have a savings account until after I started this blog!)
But as I began to dig myself out of debt, I read a lot about the importance of paying yourself first. For a while, I didn’t get it. I didn’t understand what people meant when they said this; after I started making debt reduction a priority, it started to make sense. If, when you get paid, you set money aside for your financial goals before paying bills and buying toys, it’s far easier to achieve your dreams.
So, for example, when I was working my debt snowball, I made sure that the first thing I did when I got paid every month was to pay down my debt. Next, I paid my bills. And if I had money left over (and I usually had a little), I used that to buy comic books or to eat at a restaurant.
Once I’d repaid my debt, I continued to pay myself first. But instead of using the money to pay off my past, I used it to pay off my future. I began to save for retirement. I started by setting up a Roth IRA through Sharebuilder, which automatically pulled $333 from my checking account. When I realized I could also set up a solo 401(k) through my business, I did so, and I started funding that as much as I could and as soon as I could.
Now I’ve reached a point where I not only try to fund my financial goals early each month, but I also try to fund them early each year. Once I decide how much I want to save for retirement each year, I try to invest that money as soon as possible. (By May or June is ideal.) And in a move that’s sure to drive certain readers crazy, I actually try to pay my taxes as soon as I can, too. As a small-business owner, I’m required to make quarterly payments on my estimated taxes. What I do instead is save like a madman during the first few months of the year so that I can pay all of my estimated taxes by the end of April.
King of the world
Why do I do this? Why am I so obsessed with paying myself first? Because I’ve found that it feels fantastic to know I’ve met my financial goals before I’ve even had a chance to spend the money on other things. Just as I can sit here at my desk, basking in the warm glow that comes from knowing I’ve already finished my exercise for the day, so too paying my taxes early (and funding my retirement as soon as I can) lets me spend the rest of the year without a black cloud hanging over my head. This year, for example, I can save for our trip to France and Italy without wondering if I still need to set money aside for taxes.
Simply put: When I pay myself first, I feel like I’m king of the world.
Okay, that’s enough with the money metaphors. I’ve used them a lot lately, so I’ll give them a bit of a rest. Inspired by the comments on this morning’s post, Wednesday discussion will be an “ask the readers” about the processes and systems you use to keep your financial life flowing smoothly. (Tomorrow’s article is from April.)
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