I used to spend my salary months in advance. I’d walk around with a mental shopping list ready to go nuts as soon as my wages hit my account.
I knew that saving money was important, but it was something I’d get to after I bought X, or did Y, or when I was earning more money.
You probably know you should save more, but it’s low down on your priorities.
Here’s a little exercise to try that’ll help you see the urgency in saving:
The Payday Exercise
- Decide what age you would like to retire
- Deduct the age that you are now
- And then multiply by 12
The math for a 42-year-old who wants to retire at 55 looks like this:
- 55 – 42 = 13
- 13 x 12 = 156
What you’re left with is the number of paydays you have left to make the money you need to retire with (assuming you get paid monthly).
Depending on how well you’ve built your financial house so far, this number is either going to comfort you, or send you into a dizzying panic.
“OMG! I’ll be working till I’m 100!!!”
Even if you’re a long way from retirement with paydays aplenty, be careful of spending with reckless abandon.
You never know what life has in store for you, and the paydays you have left to reach your goals could be less than you think.
So, how do we make the best use of our salaries?
Well, making the most of each payday is of course about enjoying life.
We work hard for our money, so we should be able to spend it on things and experiences we want and that make us happy.
But it would be short-sighted to only focus on current happiness and rob ourselves of joy, experiences, and opportunity in the future.
The tricky task we have is balancing our immediate needs and wants with those of the future.
How much you sock away will depend on your age, disposable income, your goals, and the importance you place on achieving them.
BUT… what can be said with absolute certainty, is that it should never be zero.
Save A Little Of Everything You Earn
Saving shouldn’t be something you’ll get round to; it should be something you do regardless of how much you earn or what other commitments you have.
Don’t promise yourself that you’ll start saving someday, because that someday will never happen. There’s never going to be a perfect time.
There will always be something else you want – and having or doing that thing now will have a stronger pull than a more prosperous future 20 years down the line.
So, the best time to start is NOW. Commit to saving a portion of everything you earn.
Even if it’s only a fiver, the important thing is that you save a percentage of all money that comes into your possession.
It might be hard to imagine now, but there will come a point when you’re no longer able to work – your body won’t be able to kick it like it used to, and you won’t have the same energy and drive. But long before reaching that point, you’re likely to want to stop working (or at least reduce your hours).
The amount of money that you’ll earn in your lifetime is therefore capped.
Your earnings window is closing with each passing payday.
So, you’ve got to make the most of your wages while you’re still earning, and that means saving some of it.
Pay Your Savings Tax
The easiest way to consistent savings is to treat saving like another tax that’s paid whenever you make money.
Just like taxes are automatically deducted from your wage by your employer, you should automatically deduct your savings from each wage.
And when your income increases, so should the amount of tax you pay.
This simple mindset shift automatically takes care of those vital tasks that lead to financial success: paying back debt, building an emergency fund, investing. And it can lead from saving just a few leftover pennies to saving half of everything you earn.
But no matter where you’re currently at, the important thing is that you always pay your “savings tax”.
Because the paydays you have left to make a difference could be fewer than you think.
What’s Your Number?
Now, over to you.
How many paydays do you have left? And are you maximizing them?
Each payday really is precious. Don’t squander them.