Pay yourself first! - Aussie Stock Forums

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  1. #1

    Default Pay yourself first!

    Hello guys, there are a few people preaching about paying yourself first when you get paid before paying any bills. any suggestion on this prinicple especially with an offset account? i.e how to pay yourself first when the pay gets transferred into the offset account?

    and is this principle commonly practiced or just by a few?

  2. #2

    Default Re: - Pay yourself first!

    Something I learnt years ago when first in business.

    Many just draw from their small business and neglect tax issues not to mention Profit and loss---even wether the business can afford the drawings.

    A friend of mine still does this even though he has been a financial adviser for 12 yrs.

    Having paid myself as an employee for many years it is much easier for me and the business.

    To your case.
    Offset accounts are a product designed by some genius to allow the interest from one account to offset the interest of another --normally a house loan.
    Based upon highest balance for the offset account and lowest balance for the principal account.That way the bank can charge you 2 sets of account fees.

    The whole principal of paying yourself is to have you running your offset account as a mini business.Thus giving you structure to your financial dealings.
    A good start if nothing else.

    However if your excess funds can return more than NETT 2% then why have an offset account with money doing bugger all??

  3. #3

    Default Re: - Pay yourself first!


    i guess there are only two options available for me at the moment.

    1. Keep the money in an offset account to reduce my interest payment and hopefully create some dents in the mortgage or,

    2. Put them into shares or managed funds that can hopefully give me a return of more than 6.72% nett (after tax and whatever fees involved) to make it worthwhile.

    with inflation rising and a possible increase in interest rate and a flat ASX, i would prefer to park that money in the offset account. and of course one of the advantages is that it is not taxible as well. after saying that, i do hold three shares.

    the impression i have about paying oneself first is to transfer the amount you want to a seperate account e.g. from my offset account to another savings account. But i don't think there is a savings account that pays higher than an offset account. So if i want to pay myself first, what are the options i can have?

  4. #4

    Default Re: - Pay yourself first!

    As interest is based on the highest positive balance then the first payment out of the offset account should then be to you.

    I cant see what more is meant.

    Do you have any equity in your home?

    IE is it worth more now than it was when you first bought it?

  5. #5

    Default Re: - Pay yourself first!

    paying yourself first is really just about getting out of the job cycle.

    people tend to pay what they owe and then whatever is left live it up, if nothing is left then they go without.

    Basically (my understanding) if you pay yourself first then you live it up and if you run out of money for bills you find a way of making some.

    ATM i earn income from job and from investments. When i get paid I pay bills then invest what is left and reinvest investment income.

    Within two years I hope to earn enough from investments to be able to live off etc and simply invest ALL my JOB income, or reduce my work load.

    Effectivly it is just cashflow managment.

    IE if your insurance doesnt charge any extra to pay by the month then pay it by the month and earn interest on 11 months worth of payments a year.
    The greatest trick the devil ever played was convincing mankind he does not exist.

  6. #6

    Default Re: - Pay yourself first! (for tech/a and clowboy)


    i do have some equity on my home (with reference with only houses that were sold around my suburb similar to mine).

    what do you suggest?

    clowboy, thanks for that.

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