It’s possible to find yourself in a much better financial position if you put your money in these 7 places after you get paid.
Why is it that you are making a lot of money yearly, yet you are still struggling financially? Why are you in so much debt when your income is a lot? What’s the problem, is it that you are being too much tax on your income?
Every other factor may affect your money, but, the most important factor is that you might not have learned how to manage your money. The ideal way of managing money isn’t taught in our schools nor by most of our parents.
Do you know about 40% of people cannot pay $400 emergency expenses? Yes, it’s possible because they are in a serious financial hole at the moment.
Where should your money go when you get paid?
The thing about sending your money on errands is that it will help you build wealth, therefore, sit tight, and learn.
This can happen before you get paid, take advantage of a 401k plan that is offered by your employer. The simple act of taking money out before you even set your eyes on it, will help you build your financial haven. The worst thing that can happen to you is running out of money before you die, therefore, create this safety net today. It doesn’t matter what your age is, whether you are in your 20’s, 30’s, etc., the earlier you do it, the better it will be for you.
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Of course, once you get paid, all of your salaries go into your checking account. So, after the retirement funds have been deducted, the rest of the money goes into your checking account. Most people stop here and start buying off bills with the available balance. And they have no savings to fall back on, which puts them in a drastic mess.
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Fortunately, you can change this dynamic, by letting money flow from your checking account to other accounts to serve different purposes. This means you need to have automatic transfers and withdrawals into other accounts.
Necessities here aren’t the life-less properties that you purchase. Instead, we are talking about food, shelter, transportation, healthcare, utility, etc. This account keeps you from being evicted from your house, getting your water or electricity shut off, etc. It is directly dependent on where you live, your family members, situations, etc. This account, therefore, pays for those things that keep you alive and well. When you get paid, move a large percentage of your money to cater to your basic needs.
You must have an emergency fund regardless of how much you have in your bank account. What you have to do is move a certain percentage of your income into this account. Your emergencies will be sorted out if you have some savings, therefore, open an emergency account now. The money here must be readily available and as such be in liquid form.
There are two ways to pay off debts, depending on who you are, and how much you owe. One is the debt snowball method, while the other is called, the debt avalanche method.
The snowball method allows you to tackle your lowest loan amount first, regardless of the interest rate. Instead of trying to shy away from paying off your debts, you need to face it head-on and cross each one on the list. When you do this, you’ll feel happy with yourself for being able to deal with the most difficult situation around your money… debts.
For the avalanche method, what you need to do is tackle the amount with the highest interest rates first. In order not to hurt your credit score, you’ll need to pay off the minimum monthly payments on the rest of your other loans.
Save 4-8 months of payrolls
Anything can happen, you might lose your job, or run into a drastic situation. So, while you are still working and you get paid, you need to save a few months of payroll. Do this in an account that beats inflation. An online savings account is a good choice because of the high-interest rate that is given to your money. If something does happen to you, you can have a bit of peace of mind, knowing that you have money to live upon until you get back on your feet.
Do you know investing is a great way to make your money work for you? Holding your money in your account won’t make you rich, investing will. Do your research, and invest in real estate, stocks, bonds, cryptocurrency, etc.
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If you are wondering if you should pay off your debt first before investing, it depends on the circumstances. You can do both at the same time if the interest on your debt is low, but, if it’s a high-interest rate, you need to pay off your loans or debts first.
When you get paid, and you move your money to all of these accounts, then, you can spend the rest of it on vacations, travels, TV, and any other entertainment stuff you want. You will be in a much better financial position if you learned to pay yourself first before all of the entrainment purposes comes into play.
If you are finding it difficult to reach step 3 or 4 because by the time you get there, you do not have any money left, what you need to do is to increase your earnings. Find a side hustle, increase your capacity to earn, and then take that money and work your way around the rest of the steps.