Why you need to “Pay Yourself First”

Assalamualaikum w.b.t and a very good day to all,

There will always be uncertainties and risk that we need to face each time we decide to invest, but being afraid to overcome the risk won’t lead us anywhere. It is necessary to prepare ourselves of the upcoming consequences by taking some extra measures to ensure that our investment won’t lead us to a big catastrophe. There’s a saying that “journey of a thousand miles start with a single step” which means that every preemptive step that we make before investing can really make a difference in the future.

Have you encounter the term “pay yourself first” before? Why does this concept plays an important part in paving your way in achieving financial freedom? Here’s an example for a better understanding of the concept. A big structure will require a strong foundation to support its weight. The structure will be safer from earthquakes, soil settelment and etc thanks to the strong foundations. The same strategycan also applies to the world of investment. Before investing, you need to have a solid plan and objectives since failing to plan is planning to fail at the first place. A good personal financial management and self discipline are necessary to face the obstacle in the future.

Paying your self first means that, we allocate a certain amount of money for our savings each time we receive our salary. We then planned our budget with the remaining salary. Most people spend their money to pay bills and other necessities and put savings at the end of their list which leaves almost nothing in their savings account and the cycle goes on forever. As you get married and grow old, you would eventually realize that the only plan you have for your post retirement days are from your EPF which won’t be enough since a study reveals that majority of people spend out all their EPF money in 2 years. This is why we need to plan ahead by saving our money in adequate investing instruments that suits our requirements.

The minimum recommended savings that we should have each month is 10% from our salary. The higher your savings, the better it is. Once you have accumulate a certain amount of money (some financial experts recommends 6 months of salary), then we are ready to begin the journey. Please bare in mind, the money you have gathered will act as a buffer to absorb potential changes in the future (loss of employment, accident & etc). The best way to manage this is by automaticaly deducting your salary early every month.

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