The First Step to Financial Freedom

Pay Yourself First

You are the chief decision maker in your life or at least you should be, so there are many valuable aspects to who you are.

The answer is in the subtitle of this blog, you need not read any further. If you get it, I don’t want you waste anymore time. Go forth and start paying yourself FIRST! It’s surprising how difficult it is for people to get their heads around, but it is not complicated once you remove the limiting beliefs. Money can be challenging subject despite that in its physical manifestation it has zero emotion. It’s the one who has it in their pocket or purse that brings the gamut of emotion to the transaction. The imagination can be a wild and enigmatic entity and we talk ourselves out of good money management with thoughts like, ‘how can I pay myself when the rent is due? I will end up homeless on the street!’ Or ‘my children will starve if I take the food from their plates by paying myself first.’ Or, ‘paying myself first is just selfish.’ How outlandish does all of this sound when seen in black and white? It’s pretty out there.

Money won’t create success, the freedom to make it will. ~ Nelson Mandela

The step before the first step to financial freedom is recognising that you are your own asset. You’re the one who goes out to work everyday, picks the children up from school, accommodates and loves your partner, socialises with your friends, walks the dog, feeds the cat and I think you get the gist. You are the chief decision maker in your life or at least you should be, so there are many valuable aspects to who you are. Why shouldn’t this person get paid before the utilities company, the supermarket and even the bank or your landlord?

Investment is how assets grow and we can invest in cash or in kind. If you are a business owner or freelancer, enrolling yourself in a training course that supports your trade can be written off as an expense. Even the taxman agrees with this, as long as it is directly related to what you are trading in. Books also fit into this category. Taking care of your fitness and eating well is personal investment when you can recognise self-care for what it is.  However, we started out on the subject of money. Pounds and pence, (Apple pay), the cold hard cash and you are your own investment hence you pay yourself first. In fact, this is more than a step it is the law. If you do not use some of the money you work hard for to prepare for the future, where else is it going to come from?

What an asset is not

When you spend money on a luxury item and the salesperson reassures you that the money you are spending will buy you an asset, please don’t believe them. Consumer purchases are not assets. Any items that will resale for less than you paid for them or depreciate as soon as you walk or drive out of the store such as a car, is not an asset. If you have to spend money on it to maintain it in anyway, this is not an asset. It could be argued that you get to wear the Omega watch or YSL bag and so benefit from the pleasure of doing so. The status real estate among your peers or other benefit you derive from your choice of luxury item can be many and varied and are valid. However, they do not set you up for financial freedom unless you are in a position to purchase them with your excess wealth. Assets are characterised by being able to expand your wealth.

So, how do you pay yourself first? You pay yourself first. If you receive a monthly salary from your job, then reserve 10% of the net amount (therefore excluding taxes). If you work for yourself reserve 10% of the net from your invoices and if you run a business, reserve 10% of the net salary you pay yourself. Transfer the payment into another account before you take care of any other financial matters (such as the Omega watch). If you set up a monthly standing order then it will take care of itself and you will still be able to meet your expenses, because if that cash is less readily available, you won’t spend it. You may notice you have had a few less Starbucks, which as we all know can add up. This money is not for spending, it is for investing and as you see it growing and you won’t miss the specialty coffee and other frivolous things that eat away at our wealth.

Bonus exercise

If you find that you spend and at the end of the month have little to show for it and worse still you have no idea what you have spent it on, you need to get in control of your spending. Get a small notebook or an app for your smartphone and record every single purchase and I mean everything, debit or credit card transactions, contactless and cash no matter how small. Write down what the item was, the retailer and of course the cost. After one month, analyse it alongside your bank and/ or credit card statements and notice your spending habits. Track what you spend and where without even being truly conscious of it. Come back in one month and comment your findings below or send me an email at coach [at] estherpoyer [dot] com

Wealth is the ability to fully experience life.
~Henry David Thoreau

For eight years I ran what I like to call a lifestyle business. My focus was on creating a working environment that allowed me to have a sense of freedom and find joy and satisfaction in my work. It was less about the money and more about time wealth. I wanted to be able to coach, write and travel, which I achieved and continue to grow in. During this time I not only learned how to generate business, it was almost like an apprenticeship in money and developing an understanding of it as a circumstance I could overcome. Tips such as paying myself first, tracking my spending like a wolf so I could account for and understand what I spent money on and why, the damaging effect of bad debt, survival budgets and a few other tricks have enabled my journey and taught me how to stay ahead of the curve.

For in-depth details on some of these ideas, check out Ann Wilson’s, ‘The Wealth Chef.’ There are hundreds of excellent books on money and personal finance. Please share your best ones in the comments below and also you best tips or fears about money.

People are chasing cash, not happiness. When you chase money, you’re going to lose. You’re just going to. Even if you get the money, you’re not going to be happy. ~ Gary Vaynerchuk

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