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Why You Should Pay Yourself First When You Work From Home

dollar billsWhy You Should Save For a Rainy Day

Even if your home based business is earning more money than you ever imagined, it an be important to pay yourself first and save for a rainy day. Even the best businesses will go through a downturn at some point. For some businesses, it is a season of the year that brings a slow down. Traditionally, many businesses are slow in January and February, but this varies widely depending upon type of business. For other businesses, it may be a different time of the year. For home workers, you may put in the same 40 hours a week, but not make the same pay as you do at other times. There are no guarantees of pay for work as there are when working for an outside company. Because of this, it is important to pay yourself first and take funds out to save for those slow times.

Dave Ramsey, a financial advisor, advises keeping $1000.00 in an emergency fund initially and then building to have 3 to 6 months of expenses in a savings account.

When times are good in your home based business, you will want to take 10 percent off the top of any money that comes in and place it in a savings account. You’ll be surprised how quickly this will add up to $1000.00 and eventually your 3 to 6 months of expenses. You will then have security if a big account doesn’t pay on time or business slows temporarily.

Why You Should Save for Retirement

Even if you love your home business and plan to never retire, it is still wise to save for retirement. Health or economic issues can sometimes force early retirement. Retirement savings can also help supplement Social Security, which is notoriously low for most people. Saving for retirement actually saves you money. Money put into a Roth IRA, for example, is sheltered from taxes on the money’s growth. So, if you earn $1000.00 in interest, you do not pay taxes on that additional money. Also, you can reduce the amount of self employment taxes you owe by investing in a retirement account. This also makes your money worth more. It is a win/win situation.

Since interest has a commulative effect, your savings will begin to grow faster and faster in a “snowball” effect, the more money you put in and the more time you put it in. There are many calculators online that will estimate what you need to put into a retirement amount to draw the amount of money you want at retirement each month.

Why You Should Live a Little

Although it is tempting to keep investing in your business for further growth, it isn’t necessarily wise to invest all of your income back into the business. Your time is worth a paycheck. You deserve to make life a little easier for yourself or your family. And you deserve an occasional vacation or other luxury. By planning ahead for these better things in life, you will be less tempted to splurge or put a major purchase on a credit card, sinking you into debt. Instead, pull out a set amount from each payment that comes in. This might be a percentage amount or dollar amount, depending upon how you get paid for your work. This money will go into a fund that is for vacation, mad money or other luxuries for which you are saving.

Remember that one of the reasons you chose to work for yourself was to have a little freedom to do the things you enjoy. While it is smart to invest back into your business, investing every dime back in can cause home worker burnout.


Lori Soard has worked online designing websites, writing, editing and promoting clients since 1997. Through Promo Warriors, she's consulted with over 100 clients to help them figure out what online presence works best for them. In addition to helping people learn how to start their own businesses, she writes feel-good books about the way love and the world should be.