There is no catch

Let us say that tomorrow you started having 10 percent of your gross income, before taxes, automatically taken out of your paycheck and put in a pretax retirement account. As a result of that simple, automatic process, you would eventually accumulate more wealth than 90 percent of the population. That is right. Paying yourself first just 10 percent of your income can help you achieve enormous wealth.

What is the catch? Well, for some people, it is the idea of not having that 10 percent to spend. But how difficult is that, really? Thank back to the latte factor. Let us once again use the example of someone who makes $50,000 a year. If that is your annual salary and you took 10 percent out of each paycheck before the government got its bite, by the end of the year, you had have put aside $5,000.

Now, if you had not put anything aside over the course of the year but instead waited until December to come up with this much money, how likely is it that you had have $5,000 siting around somewhere? Not very. But when you pay yourself first, you do not wait. The 10 percent is taken out of your paycheck and automatically invested for you before you ever see it. You cannot spend what you do not have, right?

So how much would this cost you day by day?

Let us see. An annual income of $50,000 equals about $4,200 a month. That just over $2,000 every two weeks. So to save 10 percent of that, you had have to put aside about $200 every two weeks or $14 a day.

Now, let us ask how much it will cost you if you do not pay yourself first. If you invested just $200 every two weeks for 35 years in a retirement account that earned an annual return of 10 percent, what would you have?

The answer is that you would have more than 1 million dollars. Actually, a lot more.

The exact figure is $1,678,293. That is what it cost you if you do not pay yourself first.