Pay Yourself First with Three Lifestyle Changes

Counting money

Photo by Sharon McCutcheon on Unsplash

Dean Vagnozzi, the founder and CEO of A Better Financial Plan, advocates for money management strategies that grow wealth while reducing risk and minimizing tax liabilities. Dean Vagnozzi developed the 1346 Plan based on the rules outlined in The Richest Man in Babylon, a personal finance book written by George Samuel Clason.

Rule number 1 encourages people to prioritize their savings by paying themselves first. There are several ways to incorporate this rule into financial plans:

- Reverse budget: Rather than making a budget based on expenses and saving the remainder, first save 10 percent of all net income. The remaining 90 percent can be used to cover bills and variable spending. Unnecessary expenses, such as subscriptions and vacations, should be cut to balance the budget.

- Separate savings account: To avoid mingling funds and reduce the temptation to spend, savings should be held in a separate account. If possible, open an account at a different bank that offers a high-interest rate. Keep long-term and retirement savings separate from emergency funds, which are meant to be easily accessed in times of financial stress.

- Automate savings: Saving money is much easier if it happens automatically. Employees can ask for a portion of their direct deposit to be allocated to a savings account. Many banks also offer automated transfers through their online banking systems.