That's why, as soon as you start making money, "the first thing you need to do is pay yourself first," he says, adding: It's "the single most important decision you will make when you get your first job."
Paying yourself first means that, whenever you earn money, you set aside a portion for your future self by putting it in a retirement account, where it can grow over time.David Bach, says Bach. It's an employer-sponsored retirement savings vehicle and effective for a few reasons: It offers large tax advantages: contributions are made pre-tax, so the more you contribute, the more you reduce your taxable income and, in turn, your tax bill.Often, companies offer, which is essentially free money. The way it works is, your employer will match whatever contribution you put towards your 401 up to a certain amount.
How much should you aim to set aside? Rather than thinking about that figure as a percentage of income, Bach likes to think about it in terms of hours of your life: Aim to keep "one hour a day of your income," he says. Say you earn $50,000 a year. That's about $1,000 a week, or $25 an hour for a 40-hour week, so you should try to save $25 a day.as a percentage, one hour's worth of income comes out to roughly 10% of your gross income, Bach says.
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