The typical scenario is that you get your paycheck. After you recover from the shock at how little is left after taxes, you proceed to divide it up among all your outstanding bills, intending to put whatever is left over into your savings.
But there never seems to be anything left over and your savings don’t grow.
A better plan would be to Pay Yourself First. Don’t let the money get into your hands.
You might find that you actually begin to grow your savings much quicker this way.
Standing instructions to your bank to move a set amount to your investment account helps in working on a systematic investment saving method. The beauty of the power of compounding is that your money grows over the years and all you have to do is automate your finances.
After that is done, then figure out how to pay your bills and living expenses. If money is tight, cut back on your living expenses and use the extra money to pay down your debt.
For the debt, start with the lowest balance first. Once that debt is paid, take the amount of money you were paying on that debt and add it to the payment on the next lowest balance debt. Continue doing this and you can be totally debt free within 5 to 7 years.
Another version of this method is paying the highest interest rate debt first. The principal is the same, you just see more progress with the first method, although it could be more costly based on how your debt is distributed.
You will be shocked at how much money you will save and how fast you can eliminate debt.
The idea is to scrimp at the expense of your current lifestyle, while leaving your savings to grow and you debt to shrink.
I know many of the people reading this will scream that this is an impossible plan.
But it is quite doable with a positive mindset, the ability to delay gratification for a while and stick to an actionable plan.