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  • Writer's pictureBill Holmes

What young people need to know about money - Chapter 2 – Pay yourself first!

Updated: Aug 26, 2021

Project, program, portfolio
When you are young, time is on your side!

"Get rich slow or get poor fast.” Anonymous

"Stop buying things you don't need, to impress people you don't even like." Suze Orman

My first job was bagging groceries at Piggly Wiggly Southern, a grocery chain that was prominent in GA in the early 1980’s. I had had other “jobs” before, but this was my first corporate job and my first experience with tax withholding. I can still recall looking at my first pay stub (I made $3.00 an hour) and wondering why the government was taking my money!

I asked my dad about this, and he explained income taxes to me. He then made a profound observation that led to my first lesson. He told me that the beauty of the US tax system was that they withheld taxes before you ever saw the money. Because the money was taken out before I had an opportunity to use it, it was as if it was never there. Brilliant!

My dad then told me to learn from the government and use that method to pay myself. Systemically withdraw money from my paycheck before I saw it and invest that money. Pretend it isn’t there and watch it grow!

Several years later I was hired by the US Government and had access to the Thrift Savings Plan, the government 401(k). Even though I had taken a significant pay cut (that is a different story!) for the new job, I immediately began contributing enough to maximize the employer match. Every time I received a pay raise, I increased my contribution and paid myself first. Eventually I reached the legal contribution limit and expanded paying myself first to other investments.

There have been lean times in the 32 years since I began paying myself, but since I never actually saw that money, it never occurred to me that it was even available. I trained myself to believe that the only money I had was my paycheck’s net deposit into my account, so that is what I used to live on. I literally had no idea how much my gross income was, only how much I brought home. Forced austerity!

This seems like such simple guidance, but it is incredibly important for young people. Time and compound interest are on your side! Set up a system to pay yourself first, then pretend that money isn’t available. Your future self with thank you.


I want to apologize to my loyal subscribers for being slow in publishing these articles. I have two daughters going to off to college and several business ventures that we are involved in. Even with all this going on, I should have still had time to complete my articles. I lacked the discipline. I am back on track and will be back on a weekly publication schedule. Thanks for your patience!


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