Happy Valentine’s Day !
Valentine’s Day, a day that we express our love for each other. One of the things I realized growing up in the world was that you have to love yourself first before you can love another. Wise words that everyone knows and understands. Yet we can put so many things ahead of ourselves out of love and not realize that we are limiting our ability to give more in the future.
Yes, it is love when parents sacrifice their retirement plan for their children’s education, and it is love when careers vanish in order to take care of a sick child or parent.
Financially we can love ourselves by paying ourselves first. It is a basic concept in personal finance and one that so many of us still don’t practice. We pay the bills, and the kid’s education, and anything left becomes spending money or savings.
With this new year, consider reversing that trend. Pay yourself first. Commit to fully funding your 401K or put 10% of your gross income into savings. Do this on automatic deposit so it doesn’t cost you anything. Why? Because you want your money to be working for you right away. The power of compound interest is magic! Money growing at 6 percent per year will double in about 12 years, but it will be worth four times as much in 24 years. Compound interest requires you to sacrifice today to reap a benefit tomorrow. The future reward will be greater than the sacrifice. For a detailed description of compound interest, check out the video here from Kahn Academy.
You will be surprised at what can happen. Most people don’t even notice that they have less money to spend but adjust their spending to whatever is left.
The upside is there is more for yourself and your family. More money for retirement, more money for the kid’s education, more money for vacation, and more money for taking a sabbatical.
We can all use a little more money…… pay yourself first, and watch the money pile up.