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Fri12192014

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Pay Yourself First

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Before you pay the bills, pay the savings account!

Having a steady job, especially in today's economic climate, is a blessing indeed and should not be taken for granted. The money made from this job helps support ourselves, our families and those in greater need than us, which of course comes after we have paid all our bills. These bills can include a mortgage or rent payment, car payment, electricity, water, all kinds of insurance, college tuition, internet, cell phone, and the list can go on and on. Most people will use their paycheck to pay off these bills and then keep their remaining earnings in savings or spend it as they please, which seems like a very logical approach because the bills aren't going to pay themselves! However, this is actually the opposite mindset we should have; a more effective way of saving is to pay ourselves first, and then take care of the bills.

Paying yourself first is a savings concept that has been around for a long time but has been made easier recently due to the convenience of online banking. One could argue that paying yourself first or paying your bills first is the same, as the bills are not going to get any smaller. While this is true, the benefit of paying yourself first is initially more psychological than based on pure numbers, especially for people who have trouble saving. Putting money into a savings account as soon as you get the paycheck can give a small peace of mind that was not there before. There should be enough money left to pay the bills because the numbers have not essentially changed. This shows one that they can indeed have some money left over, which can then spur attempts to save even more money by cutting out unnecessary expenses. Israaf (extravagance) is a sin in Islam and can also be a barrier to financial peace. Paying yourself first can be a useful way to take down this barrier and start on the road to a better future.

Having spoken with some brothers in the community, a thought that commonly creeps up is that saving is difficult for us because we have to pay Khums (Islamic tax) on the money we save. Indeed we must pay out 20 percent of our annual savings to the eligible needy and our respected Maraja Taqleed (Religious Authorities) or one of their authorized representatives, but this should not deter us from saving. While being a Qur'anic injunction and thus Wajib on us all, giving away two dollars out of the ten we save is not going to send one to the poorhouse. Eight dollars will still remain to be used as one may wish to, be that putting it away in an emergency fund, investing in the stock market, giving to charity, or saving for a trip. Khums is not there to keep us from saving, but to make sure that the Muslims are taken care of. This is a much nobler goal than ensuring we have an extra cushy retirement, and will also lead to a massive return in the Hereafter.

There is also a fine line between saving and hoarding. Hoarding is essentially saving without any goal or aim and just collecting wealth for the sake of it. Imam Ali (peace be upon him) reprimanded his own companions when he found them hoarding wealth for no purpose. We should always remember that if we are saving money, it is for a specified goal and not just to accumulate more wealth.

Finally, in today's world of online financing, it is easier than ever to save money. There are numerous online savings and investment accounts available which take only a few minutes to sign up for. Once you sign up, paying yourself first is as simple as linking one of these accounts to your checking account and having a set amount withdrawn every month. It is very customizable also as you can set weekly, bi-weekly or monthly transfers. Saving as little as $25 a month can be beneficial; it is a starting point on the road to stronger financial future. We can all cut out unnecessary expenses and try to save a little more in order to better serve our religion and our families, insha'Allah.

Author of this article: Wajahat Hussain
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