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Pay Yourself First

You’ve heard this before, but it is so important it should be repeated. Pay yourself first. Take a percentage of your paycheck, say 5-15% in a money market mutual fund, and set it aside before paying any other bills. Do this automatically if you can. If you have to write a check, you’ll mess this up!

You can use a military allotment to do this. The advantage is that you never even see the money in your paycheck. The drawback is that DFAS doesn’t make the payment into your savings account until the end of the month. The government gets to use your money for one month interest free! For this reason, I have my savings automatically deducted from my checking account on payday. I see the money moving, but I don’t have to make the decision to save that month, it happens AUTOMATICALLY.

Pile the savings up until you have 3-6 months of living expenses set aside, then begin investing in low cost, no-load mutual funds. The cash buffer will keep you from liquidating the mutual funds when the prices are low (like now), and the invested funds will have a real chance to grow over time.

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