2020 Q3 Lifestyle Money Talk

Pay Yourself First

“Rational people don’t risk what they have and need for what they don’t have and don’t need.”     –Warren Buffett

Pay yourself first is the next money principle we are going to discuss today. Hello and welcome back to “Money Talk,” a series of discussions on financial independence here at Epistoliorum.

I think it’s fitting to start our discussion with a quote from one of the most successful investors of our time, the “Sage of Omaha,” Warren Buffett himself. With a net worth of $70B as of this writing, would you believe Mr. Buffett still practices what he preaches?  He still lives in the same house he bought for $31,500 in 1958 in Omaha, Nebraska.  

Although most of us don’t aspire to be as wealthy as Mr. Buffett, certainly we can learn a thing or two from him.  Ideally more, but for the benefit of our discussion, we’ll focus on financial self-discipline today. 

Financial self-discipline is the most difficult topic to write for me.  Many financial advisors are said to have not followed their own advice. You can count me in this group.  My wife and I have spent and are spending too much money on food and vacations. But this we can talk about at another time.

According to a 2016 Go Banking Rates Survey, only 15% of American adults have over $10,000 in their savings; 34% have none at all and 35% have a few hundred dollars.  In 2019, the number of American adults with over $10,000 saved, inched higher to 21%, yet this figure is still far from ideal.

Sixty-six percent of Filipinos don’t have a formal savings account according to the 2017 Global Findex Database by the World Bank Group.  They found out the reason for this dismal number:  they didn’t believe they’re capable of saving.  Are you one of these people?

In the final analysis, our beliefs are the source of our habits.  Our beliefs lead to our thoughts, our thoughts to our actions, and our repeated actions become our habits.  But we know that belief in our incapability to save is not supported by facts as shown in the above-mentioned reports.  

I believe our failure in savings is primarily caused by a lack of self-discipline.  Self-discipline isn’t only a path to financial freedom.  It is also a path to building a good character as well as a path to happiness.  Immediate self-gratification is a hindrance to developing self-discipline.  

Financial advisors are quick to note that paying ourselves first is one of the best ways to overcome a lack of financial discipline.   Setting up an automatic payroll deduction of at least 10% of our income, directly deposited to an investment account can be done simply and easily.  If you haven’t done this yet, do it right away.  This could be one of the best financial decisions you can do for yourself.  

One person close to me has followed this advice.  She is so thankful that she has been freed from her usual money worries.  And lately, she asked me where to invest some of her disposable funds.  Unfortunately, I can’t legally do it anymore because my license as a financial advisor has expired.  But I am sure you can find a good financial advisor for yourself if you need one.

As shown in our previous discussion entitled “Big Things Come From Small Ones,” it is ideal to start early, for time is money.  Set up that automatic payroll deduction now so you can start paying yourself first. It’s like having your own money tree.

Just imagine if you had started 5 years ago.  COVID-19 will have been a little less stressful.  Just a little less, for this pandemic has placed almost everyone in an undesirable financial mess. 

 

Peter Nunez
"Fray Peter" heeded the call to the priesthood right after high school. Upon completion of his temporary vows of poverty, chastity and obedience in the Order of Preachers (Dominicans), he realized he had a different calling and so he ventured out into the world. At first, he made a lot of mistakes from which he learned. In 1992, he joined his wife Alicia in the U.S. They were blessed with two fine sons, Stephen and Michael and “adopted” two wonderful daughters Pau and Joni. From them, he has 4 grandchildren. He started his professional life in the U.S. as a part-time teller and after 6 years was promoted to Branch Manager of the Bank of New York in their two branches in New Jersey. He also joined the North Fork Bank as Branch Manager with the title of Assistant Vice-President. He was a member of the National Association of Securities Dealers (NASD) which authorized him to sell various investment products. As a side hustle, Peter is working on his photography skills and has co-founded "The Traveling Chefs." Peter enjoys reading, writing, cooking, travel, golf, photography and triathlon.
http://thetravelingchefs.us

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