Saving Wisely With Our Paychecks

I know a lot of us are employees working for a company and struggling hard to survive on our paychecks. I belong to that category. When that paycheck comes, a lot of us spend it from paying our bills to treating ourselves like buying gadgets and other entertainment wants.

If we want to achieve our financial goals, then we must start to save as early as possible. And that is NOW! The earlier we started our savings attitude, the more possible we can achieve our financial goals. 

We are used with this equation, INCOME – EXPENSE = SAVINGS. This is the scenario given above. As long as we received our paychecks, we spend it on a lot of ways. Whatever left from our expenses is our savings. I always believe in the concept of ‘delayed gratification’. That is, we delay our satisfaction in order to prepare for a future goal.

And this is where we need to save wisely. We need to arrange our equation. Instead of the equation written above, why not use INCOME – SAVINGS = EXPENSE. In this scenario, we pay ourselves first more than anything else. Each time we received our paychecks, we set aside a portion of it to our savings. We treat SAVINGS as an EXPENSE. Why?

Because Savings is the most important of all expenses since it buys the most important thing – YOUR FUTURE.

As Warren Buffet said: “Do not save what is left after spending, but spend what is left after saving.” If we view ourselves as a corporation, then a corporation must have a plan and budget for expenses. What is the first priority expense of a corporation? Yes, it is the payroll of employees. If you agree with this, your first priority should be “paying yourself first” because you are the sole employee of your own company. Paying yourself, in this instance, means compensating yourself for the use of an income-generating asset which is yourself. This compensation is your savings. Thus your income must first be reduced by your savings. What is left after will then be available for your living expenses.

Now, the question is how much should go into savings? This is where I will turn you to Pareto’s Principle or more commonly known as the Principle of 80/20. Ideally, it states that, for many events, roughly 80% of the effects come from 20% of the causes. When applied in savings, we should then need, ideally to set aside a minimum of 20% of our salary.

Now, you might ask how could you do that if you have a lot of expenses? You need to become frugal. Learn to budget and live below your means. For more of that, you can browse any of my articles under savings.

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Tyrone is a passionate financial literacy advocate. He started this blog on November 2008 when he watched The Secret which talked about Law of Attraction because he wanted to become a millionaire and wanted to know how a millionaire acts. At the age of 26, he achieved his first million. To find out more about him, click here or follow him at Instagram

7 responses on “Saving Wisely With Our Paychecks

  1. Hello!

    I really wana save more of my salary. I am 25, an engineer working in a big company who earns not-so-much. I always want to save a lot for my future. but my fiance always tells me I am “kuripot” or “mukhang pera” whenever I tell her to lessen our expenses (less going out to have a date) I always tell her that I fear of becoming poor, again (I came from an average family- my father was a pandesal vendor back then, when he was 7 years old. and a businessman now. from rags-to-not-so-very-rich I guess) everything that I have now including my car came from my father. I wana have something that came from my own pocket. I really wana save for my future. but whenever we talk about these stuffs, she always freaks out. she doesn’t mind spending all of her salary. she always think that her salary is not enough but I always tell her to save even just a bit. I just secretly save some of my salary in a bank. I’m planning to divide all my savings so that I can also invest in the stock market. maybe this 2012, I’ll try to save more so I can fulfill my plans for my savings as early as possible. as I have ready your articles, I’m planning to have envelopes for my paychecks. to accurately divide my salary (for the church, for my allowance, for emergency, for my savings and for extras) I wana break up with her, I can feel that I won’t fulfill my dreams being with her. I know I sound sarcastic. I’m just sharing 🙂

    • You’re not alone lonelyboy. I am also getting feedbacks such as those you are receiving from some of my friends. Hehe. Anyway, if you really feel that you cannot change her attitude with regards to money management, then I think it’s time for you to let her go. Look for a partner who share the same dreams as yours. 🙂

    • Breaking up w/her is the best decision you could ever make. If as early as this you dont agree on financial matters, your marriage will be a disaster. each one of us has his own financial blueprint. I admire you for your wisdom because you’re stll young and you’re on your way to building wealth. God bless you!

  2. hi, tnx for this great site. just want to get your side on my scenario where as much as i want to save and invest i really don’t have that much money left every payday since i support my relatives. so if i would want to really save up and invest then i need to stop 5 kids from going to school (not my kids). then i won’t have to give some to my mom and bro as well. i tell you i should have been a millionaire as well a long time ago, but because of this non-stop people-who-need help financially it’s really hard to get out of it.

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