Paying Yourself First

Lobby Con Shine

I was always advised (and came to the conclusion myself) that paying yourself first while being self-employed was a big no no.

See link below from an American businessman called David Bach. I am usually a sceptic when it comes to gurus telling people how to get rich. Bach, however, comes at it from a different angle. His modus operandi is simply to pay yourself first. It's advice for both the self employed and those in employment. You then automatically, by way of direct debit, save money or invest in a pension etc.

https://www.youtube.com/watch?v=u8finwPfQco


My situation is that I am self employed in my late 30s. I have a decent standard of living but I have no savings. I have no pension and I would imagine that my situation is fairly common. I spend whatever I take in because there's always something that needs to be paid for.

Before I start trying to put what Bach says into practice, has anyone tried this or is this nonsense dresssed up as sagacious advice.

Bandara

Haven't looked at that clip, but I've always come from the angle that you pay yourself first and most

I meet so many people who are self employed for 5 years of more and have never paid themselves properly

Even if it means 'creative accounting' you have to get paid. You work too hard and put up with too much not to.

Atomico

I have never heard it referred to as a no-no - surely the idea of working for yourself in the first place is to make a living for yourself! I think it is more that in many cases you may not be able to pay yourself as everyone else has to be paid instead.

If you aren't in a position to pay yourself then what's the point of being in business at all? Fair enough if it's a temporary thing and you can work through it back to earning a salary again, but if it's a continual or 'normal' situation then I'd say you would need to be looking at your business and most of all at the underlying business model.

I worked with someone before who was the owner and manager of the business and at one stage he told me he hadn't paid himself in months. I was astounded at first but not surprised at the same time, and I am sure it is a very common occurrence altogether.

On not having a pension, I read only last week that if you haven't started one by the time you're 40, you have a mountain to climb if you want to have enough for retirement. The article looked at the age at which you would need to have started a pension in order to have $/€200k in the retirement pot, and how much you would have at retirement if you started at a given age.

The difference between starting at say 25 and say 40 was staggering, due to the effect of compound interest. Basically, the later you leave it, the shorter the time period you have for that compounding factor to build up the pot of cash you will have to draw from when you retire.

If you started at 25 you might only need to have saved maybe €250/month to achieve your goal, but that figure could be something ridiculous like €1250/month starting at 40+.

At the end of the day if you have no savings and no pension then what do you do if you can't work?

pedroeibar1

The only time paying yourself first is wrong is when it is at the expense of others*. Otherwise you are a fool not to look after No.1. You have put your neck on the line, you have not paid sufficient attention/time to family, you have worked all hours, created wealth/employment/added value and you have contributed to the general wellbeing of this State through taxes. What is the point of all that if you do not reward yourself?

A pension is (for the moment) an efficient way of putting money away in a tax efficient way. Exploit it while it is there. Sadly the political pigs (who do not have to worry about pensions for their futures) now have begun to put their collective snouts in the trough and have a levy on what you have put by for your future.

You should also build up a fund for emergencies – cash/shares/anything easily & quickly disposable should you need cash or a cash cushion.

*Even that is now doubtful, (legally, not morally) as several big-name individuals pillaged their companies, gave loot to their ‘wives’ and thumbed/are thumbing their noses at enforcement agencies or professional disciplinary bodies. Not sure that Ireland has any of those.

Lobby Con Shine

Thanks folks.

I'm going to have to sort my stuff out. I've been ensuring that everyone and everything else gets paid which leads to haphazard payments to my personal account each month rather than a defined salary.