He and his wife, Michelle, make it a practice to set aside the first 20 percent of their gross income.
“That may sound like a lot, but because we’ve worked up to it gradually over the course of 15 years, it has become our new “normal.”
Bach didn’t become a millionaire overnight, he points out. “When I first heard of this concept (paying yourself first) I was doing what most people do – trying to budget, beating myself up for failing and then scrambling at the end of the year to find some money to put in my retirement and savings accounts, only to find another year had come and gone and I had not made any financial progress,” he writes.
When the idea caught on, he began setting money aside regularly, but it was 1 percent of his paycheck, not 20 percent. After three months, he realized how easy 1 percent was and he kicked up to 3 percent. “I can tell you from personal experience that once you decide to pay yourself first and then make it automatic, it’s done. Within the first three months, you forget that money that is going into savings.”
As he was able he continued to increase his “pay-myself” contribution up to 10 percent, then 15 percent and on up to 20 percent.
Bach doesn’t accept excuses. Anyone, regardless of income, can put money aside and let it accumulate, he insists. A lot depends on one’s mindset. “If you are not paying yourself first now, it’s probably because you think you can’t afford to, but once you decide to do it, and make it automatic, you’d be amazed how effortlessly you can learn to live on a little less.”
If 1 percent seems a reasonable self-pay goal for you, it’s better to start there than not to start at all, he says. It’s a decision that, over time, can assure your personal financial health and set you on the path to wealth.