Always Pay Yourself First. Here's Why

“If I had five minutes to chop down a tree, I’d spend the first three sharpening my axe.” – Abraham Lincoln

“It’s a small price to pay, but investing a little extra effort into the life you choose will move you from average, where all the competition is, to the top.” – Richie Norton

“Last-minute effort does not make up for years of neglect.” ― Frank Sonnenberg 

We hit our first big milestone after 4 years of bootstrapping our startup Seamfix.

A SIM Registration project with a leading telco in Nigeria earned us over 50 times our cumulative previous revenue since inception.

In excitement, one of my co-founders proposed paying ourselves a small share of the profits at year-end.

However, I thought we should put all the money back into the business, except for our salaries.

I sought advice from my dad, who ran a chartered accounting firm that also provided auditing services to us.

With a smile, he agreed with my partner. He advised we make it a habit to pay ourselves when we can, even if it's a small amount.

While reinvesting is important, the founders' welfare is paramount.

The knowledge that our business benefits us personally and individually would be a big push for us.

After all, reinvesting simply meant keeping the money for future growth expenses, which meant paying staff and vendors.

So why should some not come back to us?

He also suggested that I use a portion of my payment to reinvest in my education and expand my knowledge.

Especially as it had been 4 years since my undergraduate degree and it was good to periodically “sharpen my saw.”

Lastly, he suggested I invest my money in ways that make it difficult to spend. Whether in investment accounts, stock, or buying land (real estate).

I followed his advice completely.

We rewarded ourselves with bonuses, and it felt great, a first for us.

As I saved money over the years, I diversified my investments into stocks, mutual funds, and real estate.

Shortly after, I enrolled in an online Masters program. I've also been making an effort to attend a short course or business program every other year since then.

The knowledge and exposure have been extremely valuable for me and Seamfix.

The Lessons

1. Paying yourself first increases your financial security. This is what fuels your confidence to undertake greater risks and devote more of yourself to whatever generates income, as you have seen it work and benefit you.

2. Contributes to the growth of your wealth. Paying yourself includes setting aside part of your income for investments, and prioritizing it over bills and other expenses.

Saving 10% of your income every month in an investment account will allow you to benefit from the magic of compounding interest throughout your career.

3. Helps you get more disciplined. Many people believe they don't have enough personal resources to save and invest. The likely reason is that you are not in control of your expenses.

If you first put something aside, you'll have no choice but to adapt to what remains. In most cases, expecting to save after expenses will leave you with nothing.

4. Enables you to invest in your most important asset - yourself. Remember, you are your own most valuable asset. There are few things as beneficial for your money as spending on education and investing for the future.

Have a super week!

PS: “Pay Yourself".

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