Paying Yourself First

What does it mean to pay yourself first? Think about it. If you earn money, say, in the form of a paycheck, and you spend all that money, who has gotten paid? Say you spend the money on taxes, a mortgage, credit card bills, restaurants, and stores. The government, credit card companies, restaurants, and stores have all gotten paid. But, you didn't. That's right. You may have felt like you got paid, because you have "stuff" now. Yet, you didn't get paid, because you don't have the money. You acted as sort of a middle-man; those companies got paid through you. You were like a delivery person, taking money from one rich person to another. To reward you, they threw you a treat. Be sure that you are paying yourself first; this means to always save money that you'll never spend on "stuff." Ever.

Putting Money Away

so, now that we know the cash flow patterns of the poor, middle class, and rich, we should begin to branch out this knowledge into the realm of practical application. How does one apply the rich pattern to him or herself?

There are a number of habits to help us do this; the first is to pay yourself first. You have to pay yourself before anyone else. This means that you should put money away before you spend it on anything else. Putting money away is crucial, critical, and it must be done. If you spend all your money, rather than putting it away for yourself, then you really didn't get paid. Make sure that you are the one who gets paid.

The Rich's Cashflow

The rich is everybody's favorite class. Of course it is, because they have a lot of money! So, how are the rich defined? How is it that a lawyer who makes a million dollars per year be considered poor yet a business owner who makes two hundred thousand per year is considered rich? Seems strange, doesn't it? The amount of money you make does not determine what class you are in. Instead, it is the pattern of your money. The rich look very much like the middle class. They are educated, have lucrative jobs (usually), and they are disciplined with their money. They save money, and then they buy things that put money in their pockets.

The Middle Class's Cashflow

The middle class is just a subcategory of the poor. Instead of being just like the poor, they have some minor differences. The middle class has more discipline than the poor. They earn money, and generally they have a better education; they do not always have a better education or a better job, but usually they do. The middle class is really defined, though, by their cash flow. They earn money, just like the poor, but they do not spend all of it right away. Notice the key words "right away." They do spend it eventually (except some that have minor savings). Most of the time, they are disciplined enough to save money. However, they usually spend it on things like a down payment on a home. The middle class saves up to buy things that take money out of their pockets every month. By buying a mortgage, they lose money every month......guaranteed.

The Poor's Cashflow

The poor, the middle class, and the rich all have different ways which their cash flows. The poor and middle class are really of the same class; they are, for simplicity's sake, poor. However, because there are some minor differences, we will look at them individually. Let's take a look at the poor first.

The poor have an income, but it is usually small. They work hard, and they earn money; sometimes, this money is a considerable amount. However, they spend their money very unwisely. They spend it all, or at least most of it. This leads to them being poor and never getting ahead. They have no discipline at all with their money. They do not save, and they pay for it dearly by being poor; however, they are often ignorant to this process.