You may already know that budgeting your money is the key to a healthy financial life for the present and future. What you may not know is how to allocate your income to achieve this.
Along with maintaining good credit, one way to save money responsibly is to adopt the “Profit First” method.
In this article, I’ll explain to you what the Profit First strategy is all about.
What Is the Profit First Strategy?
The Profit First method is one in which you take upfront any profits you’ve made from your paycheck before you pay your monthly expenses.
For example, let’s say you get a $1,000 check. You know that your expenses are about $700, so you’ll need at least that amount from that check. A Profit First strategy means that you would first take a percentage out of that check – let’s say $100 – and put it in a separate bank account.
Additionally, you might take another $50 from that check and deposit it into another bank account. That would leave you with enough money to pay your expenses while also sharing in the “profit” from that check.
What You Need To Start the Profit First Strategy
Get Out of Debt
The first thing you’ll need to do is get out of debt. If you’re behind on your bills, you can’t allocate money elsewhere.
Read our guide on how to get out of debt.
Open Different Bank Accounts
What you need to start Profit First are separate bank accounts for things you deem important. Here are some examples:
- Open a bank account for vacations.
- Open a bank account for investments.
- Open a bank account for food expenses.
There are different formulas you can come up with to put the Profit First method in action in your life.
Final Word
You want to be intentional about the money you make and how you want it to work for you. The Profit First strategy works for either business owners and individuals.
