Get Lucky by Paying Yourself First and Saving Some Copper

Posted by Amir Lehrer on January 29, 2008

Back to the book “The Richest Man in Babylon”, here is another lesson that I feel is important to share. “Put in 10 pieces of copper into your purse but only take out 9”. When working for pieces of Copper keep 1/10^th of what you earn and save it. That will start building your ultimate wealth. In modern days the advice can be applied by putting 10% of our paychecks into a savings account. The book talks about investing a little later on but this piece of advice is the most important to start off. Without the savings, we will have nothing to invest.

This advice is pretty common and can be found in almost any personal finance strategy or book. It might be written differently or sound different but they are all the same. Rich Dad, (Robert Kiyosaki) says to “Pay Yourself First”. Before paying bills or buying what he calls “doodads” (things that we spend money on that don’t put money back in our pockets), we must take a portion of our paycheck for ourselves.

In “The Automatic Millionaire”, David Bach mentions the same thing. The first step to becoming an automatic millionaire is to pay yourself first. Preferably 10% of you salary if possible. Bach says that if you have the money taken from your paycheck and automatically placed into your savings, you won’t even notice that it is gone. It’s weird but most people can live off of 90% of their paycheck, no matter what their situation is. If it is out of site, then it’s out of mind. We know this because we see people getting raises in their paycheck every day and yet, these people do not start saving more, they start spending more. The more money people make, the higher their lifestyle becomes. There are people who make 7 figures a year and still live paycheck to paycheck and then there are people who in their best year made under $60,000 and retired millionaires. That is the story of the first automatic millionaire that Bach speaks of in his book.

I personally agree with the advice to pay yourself first or save 10% or however you want to put it. I also agree that once you start doing this and make it automatic, you don’t even notice that it is gone. I have direct deposit for my paycheck and regular transfers of at least 10% to my savings account. I don’t notice a change of lifestyle or anything… until I look at how much is piling up in my savings account.

My finances are so automatic that it is like a computerized game that just continues calculating my savings as my turns (or weeks) pass. The money comes in through direct deposit, automatically money is transferred to different accounts of mine such as savings, fun account and charity. The rest of my paycheck stays in my checking account which has automatic bill payments for all of my other expenses including rent (I’m looking to buy but more on that later), credit cards (I only spend what I have in my checking, I use credit cards because I get points, longer to pay and I get a full spending summary at the end of each year), gas and electricity ( I pay the same every month and get a credit or bill for the difference at the end of the year so I don’t have to calculate and I Can budget better), cell phone (the bills are always wrong so this is a little headache), and all the other fun bills that overflow from my mailbox.

I do check each of my accounts including all bank, credit card and other major accounts at least once a month to make sure that everything is working properly and to watch my savings grow.

Now that I have savings built up, it is time for the next step, to start investing and take advantage of one of the greatest tools in the financial world, “compound interest”. I suggest you do the same. Some people seem lucky because they saved money and invested well but knowing what to do and when to do it is how to get lucky. If you have any similar stories, please leave a comment.

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My Goals List and the Mapquest of my Life

Posted by Amir Lehrer on December 12, 2007

Most of my life I just drifted from day to day and year to year. I went through the motions like going to school, finding a job, and working. I just recently woke up and realized how much time has gone by and I don’t have anything financially to show for it. I want to retire one day, maybe when I’m 65 but preferably when I’m much younger and I have nothing saved up. I have been saving money regularly but that goes into my savings account that gets peanuts in interest and always seems to find expenses to pay for. I bought a car, I’d love to buy a house to live in, and I’d like to take some vacations over the next few years. Every time I save any money, it’s gone.

I realized that if you are traveling, you need a starting point and a destination and then a map of how you are going to get from point A to point B. The same goes for life, if you don’t have any goals, you’re not going to get anywhere, mainly because you won’t know where to go. After this discovery, I used an entire 70 minute commute home from work to jot down some goals. I made five separate lists of goals for short term, 1 year, 5 years, 10 years and 20 years. I made sure that each list paved the path to the next set of goals. Most of the goals have something financial to do with them but I also put down losing 40 pounds this year. I know it is a lot but I am only so overweight because I eat like a pig late at night and always push off exercising. In my short term goals, I just put down to exercise and in my 5 year list I put to stay under 190 pounds. I put the same for the 10 and 20 year lists.

I plan on using these goals as a road map for my life. I placed the lists in my wallet and plan on looking at them every day to make sure I stay on path, just like I would look at the mapquest directions when I’m on a road trip.

Note: Writing these blog articles are on my lists and that is why they are getting done.

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