Be Your Own Boss, Give Yourself a Salary

I just read something that changed my way of thinking over at GetRichSlowly.com.  It was about saving money from your paycheck.  Many of us struggle with this easy concept.

I know I do.

I usually have more month at the end of the paycheck.

A lot of people wait to save until they've paid all their bill and expenses for the month, then whatever is left goes to the savings account.  This usually doesn't work unless you've got a super human income or super human discipline to stick to your budget.  It never works for me.

Others do pay themselves first as soon as they get their paychecks.  This works a little better than the above method.  This is what I have always tried to do.  Sometimes it works, sometimes it doesn't.  For example, I haven't been able to put money into my savings account because of all the little nickel and dime expenses that keep coming up in my life (a broken belt and water pump on my car, a cell phone that won't take a charge, a class I have to take for my job...the list could go on and on).  The point is things routinely come up and I tell myself I can't save this time because _______ or I can't save next month because ________.

There is a third way to save though.  Bypass the middleman (your brain and excuses) and skip depositing your check into your checking account.

Deposit your paycheck into a savings account as soon as you get it instead (most direct deposit agreements allow this).  Then set a dollar amount that you are comfortable living off of and take out what you need as a salary to yourself (just make sure to keep some in your savings account).  This is a great way to build an emergency fund and instill discipline into your spending (one reader who uses this method was able to save up to 2 years of expenses).  It also cures lifestyle inflation when you get raises or bonuses at work because you probably won't feel tempted to increase your own salary (and if you do, you don't have to give yourself the whole raise, you can bump up your savings).

Something else amazing happens when you do this.  You start to feel that you are your own employer, you are your own boss, and you are in control of your professional destiny.  If you want a raise (from yourself) you don't have to rely only on your "traditional" employer; you can go out and make extra cash on your own.  You increase your entrepreneurial spirit.  Giving yourself a salary puts you in control and can open up some opportunities that you thought weren't available to you.

3 Steps to take if you want to give yourself a salary and increase your savings:

1. Open a saving account (if you don't already have one; I like to use online "high-yield" accounts like ING or E-Trade).
2. Sign up for direct-deposit at your work and make sure to direct your checks to your savings account.
3. Figure out how much you would like to pay yourself and when you want your pay.  The cool part about this is you can pay yourself weekly, bi-weekly, monthly (or more frequently or less frequently, whatever you want).  

Thats it.  Just three simple steps to become your own employer and give yourself a salary (and increase your savings at the same time). 

Here's the link to the original post at Get Rich Slowly.

Like what you just read? Join the Pennywise2Pennyworth community, click on the orange RSS feeder at the top of the page (or here) to receive updates and advice as soon as they are posted!