Do you pay yourself first?

[mama2James]

Among my financial goals for this year is to take 10% off the top of each paycheck and deposit it directly into our savings account. I am going to do this with both my paycheck and DH's. I will start with that amount and adjust it up or down depending on how our expenses and income end up balancing out. We have several changes coming down the pike: we're not sure how many hours I will work after the new baby comes, or what our childcare expenses will end up being. DH's income also varies a bit with overtime, so I figured a percentage was the best way to go. We still have some debt, but we are making great progress with that, and I feel like it is best to split our efforts between debt repayment and the security of a big 'ol emergency fund in order to keep ourselves from having to take on debt in the future.
So, who else pays themselves first, and how did you determine the amount?

[mauimagic]

Great plan - love how you are jumping in and just doing it!!

Years ago I started paying myself first by AD (automatic deposit) of $25 bimonthly for $100 savings bonds.

Then I added $100 bimonthly for an annuity.

This year I added $85 bimonthly ING EF account.

Are this the best financial decisions? - probably not, but they worked and still work for me. It has been very hard at times and we have been cash poor - but we still have those funds taken off the top.

Hopefully there will be others you have better financial advice for you and me, but for now I follow my lead of ' just do it!!

[Greebo]

We are paying ourselves first in 3 areas.

1) Emergency fund - since we started DR we decided that instead of just $1000 we would start there and then put $300 per pay on top of that into the EF. This happens automatically - my payroll sends the money to my EF bank account which is completely separate from all other accounts.

2) Investment retiring - 7.5% of my pay, calculated on gross income, is allocated to the Roth IRA and the 401k. The ROTH pulls from our joint checking account automatically. The 401k is a payroll deduction.

3) Real estate investing - 7.5% of my pay, calculated on gross, is automatically deposited into our business checking account.


mauimagic - bimonthly means every 2 months. You mean biweekly, don't you?

[dcompton]

Well, yes and no, mostly yes I suppose.

I have payroll deductions for 403b retirement.

I only have three bills each month (rent, phone, electric); all ordinary expenses I put on a CC. The billing cycle for the CC closes on the 1st or 2nd of the month, so when I get my paycheck at the beginning of the month (I'm paid once a month), I know the total due for the card and the three bills. Leaving a small cushion in the checking account, I scoop everything else at once into savings or an IRA. So it's not a percentage, but at the very beginning of the month the maximum possible goes into savings.

[Mom2-3]

DH's company will match up to 10%, so we have 10% going into a 401K. Other than that, we have an emergency fund and are working on a debt. After the debt is paid, more will go towards a larger liquid emergency fund.

[sinopa27]

I plan on starting the in Jan and pay myself 10%. My question is if this should be from the net or gross. Any advice?

[Ms. Clear]

Yes!

I take 10% off the net, and just upped it to 12.5%. My near term goal is to eek it up to 15%.

[Greebo]

I plan on starting the in Jan and pay myself 10%. My question is if this should be from the net or gross. Any advice?

If going into a 401k, go off of gross. You will be paying taxes on this money when it comes out in retirement, so why effectively double tax your retirement by using a post tax amount going in?

[frugalwarrior2]

Last year we concentrated hard on goods replacement and debt. paydown but in 2010 I plan to switch it up a bit. Our $1000. EF bounced up and down too much for my taste and I never surpassed it to build savings. In this economy the rules (for my comfort) need to be adapted. I will pay back a little less debt and have a budget line for savings. I will start w/ $100. per 2week pay period which is not stellar by any means but is a start.
We already have $50. month put into a upromise acct. which helps w/ community college for DD but we must also begin to pay DS the $2750. we owe him before June of 2011. Sometimes I just want to spin in psycho circles of despair. Thank Goodness for FV.!!

[PlainCash4]

5% comes off the top of my pay for 401k (gonna try to up it) and then whenever i think about it, i transfer like 10 or 20 bucks to my savings. It adds up pretty quick :-)

[ladykemma2]

employer takes the retirement out of the paycheck.

then when the paycheck gets home
10% to god
10% to savings money market account
fund the sinking funds
and i recently discovered that if i fund the (LDS style) food storage/stockpile in the grocery cart first, instead of last, the (LDS style) food storage is getting replenished.

my food storage got used during the divorce crisis couple of years ago.

[nic4549]

I have recently started paying myself first. I pay $100 a month to my no work summer fund which is in a high interest savings account at our credit union. Not a lot, but every little bit helps. Once that account is fully funded, I will put that money on the debt until summer is over and the funds are gone and start all over again.
Once we are debt free, we will pay ourselves first to set up our 3-6 month EF and save the 20% so we can buy the house. Just one step at a time.

[rebecca]

I have them automatically deposit $100 out of every paycheck I get an put it in my EF.

Have 6% taken out for my 401 (b) calculated on gross income.

[Kim_Mango]

I'm still trying to strike a balance of how to better budget my income but at the moment this is what I'm doing and it seems to be working OK:

10% of my gross salary goes into my 401k

10% of my net salary goes into my savings account and when I have enough to open a CD then I open a CD account. This way I have some very liquid and somewhat liquid savings.

I recently started a freelance writing job where I moonlight each week. I'm writing for a prepaid debit card call Mango Money, http://www.mangomoney.com.

It's been a good exercise for me because I treat this account as my spending money which helps me budget my monthly outflow.

First I pay all my household bills from my checking account and move my spending money for groceries, gasoline, clothes, dog food, vet bills, etc. to the prepaid debit card.

Not only can I track my spending online, I have the comfort of not worrying about carrying cash all the time.

When I get paid for this side job, I put all of this money into my savings account.

Separating my household bills and my spending money into these two accounts really keeps me honest about how much money I'm spending!

[Trishagirl]

We tithe 10% to the Lord each month. He owns it all anyway so he takes care of the rest and us too!