The First Step in Financial Planning is to Pay Yourself First

Most people think of savings in a wrong way, and so always struggle to get anything serious started because they take care of everything else first and then believe there's nothing left at the end of the month to put away to build for the future.

One that you can do to battle this is to think in terms of paying yourself first, ensuring you're building up your wealth on a monthly basis.

To do that you must change your way of thinking. Don't think of savings as the last priority, but the first priority, and how you do that is to start thinking of it as the first bill you need to pay at the beginning of each month - not the end of each month.

What this does is change the way you look at savings, and keeps you from spending it on other things before the month is over, which always will happen if you don't take it off the top first.

So if you start to think of putting away for savings as the most important bill to pay first, you'll develop a number of good practices which will end up helping build up your wealth steadily and consistently over time, and surprise you as you faithfully contribute to your net worth and not only provide a cushion for times of trouble, but also for your retirement.

If most people reading this will practice this, it will be the most important foundation to your long-term financial health, as the majority of people struggle to do this one very basic thing.

In the beginning of your wealth building, I would put the money in some type of CD with a penalty for early withdrawal to also help you from giving in to the temptation to take out money on any whim, which can happen quite often.

The point of the early stages of building wealth is to build a financial cushion which can pay you if something unexpected happens so you can pay your bills while looking for another job, or during a personal crisis. So accessing it and drawing from it for any other reason obviously defeats the purpose.

Now if you do put it in a CD of some sort, don't put it in a long-term CD, as it would tie up your money if you do need it for legitimate reasons. So only invest in short-term CDs until you develop the discipline to keep your hands off of it.

If you know yourself and are sure you have the discipline to keep it in an easily accessible investment like a money market fund or money market account, then it would probably do just as good to do that.

Another thing to keep in mind during these difficult economic times, is it may be better to build up enough cash to last you closer to a year, as it's taking longer to find jobs now than any time in recent history.

Either way, pay yourself first, build up enough cash to last a minimum of six months, and then build up your wealth through looking into other investment vehicles built upon that solid financial foundation.

If you don't do it this way, you'll find you never have enough cash to invest and always live from paycheck to paycheck without building a solid financial future.