Pay yourself first!

One of the key principles of behavioral finance is the concept of?paying yourself first. Paying yourself first suggests that before we spend money on anything else, we should put some of it away for our future goals. In this article, we will explore how setting up investment accounts and monthly contributions can help us pay ourselves first and how this can benefit our spending habits.

The first step to paying ourselves first is to set up investment accounts. Some of the most popular accounts tend to be 401(k)s, IRAs, and non-retirement accounts. The idea is to invest your money in something that will grow over time so that you can achieve your short-term, medium-term, and long-term financial goals. Setting up an investment account may seem intimidating, but it doesn't have to be. Our advisors at Gerber Kawasaki are here to help you set up an account and invest in a way that fits your personal goals.

Once you have set up your investment account, the next step is to set up monthly contributions. This is where?paying yourself first?comes into play. By setting up a monthly contribution you are committing to putting money into an investment account before we spend it on anything else. This ensures that you are prioritizing our future goals over our present desires. It's important to note that the amount you contribute doesn't have to be significant. Even small contributions can add up and compound over time.

Still, one of the biggest challenges we face when it comes to spending is the temptation to buy things we don't need. When we have money sitting in our checking account, it's easy to justify impulse purchases. However, when we have already committed to putting some of our money away for our future goals, we are less likely to spend it on things we don't need. This is because the money is out of sight, out of mind. We don't see it in our checking account, so we are less likely to think of it as spendable.

Paying yourself first?can also help us overcome the temptation to compare ourselves to others. In today's social media-driven world, it's easy to feel like we need to "keep up with the Joneses." This can lead to overspending and financial insecurity. However, when we focus on our own goals and prioritize our own financial well-being, we are less likely to feel the pressure to keep up with others.

Working with a Gerber Kawasaki advisor can help you make these small changes, start paying ourselves first, and setting up investment accounts and monthly contributions so that you can begin to prioritize your future goals and overcome our spending biases. It's never too early to start planning for the future, so it is better to start today. Remember, even small contributions can add up over time, so reach out if you are looking to get ahead.

Shawn DaCruz is a Financial Advisor of Santa Monica, Calif-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately ~$1.8B billion in assets under management as of 09/30/22. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn't buy any investment without doing their research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results."