We have all heard the encouragement to “save for a rainy day” and to tuck away at least three times our monthly expenses “just in case”. Unfortunately, the reality is Americans are saving less than ever. In fact according to the US Commerce Department, the personal savings rate in 2005 dipped into negative territory at minus .5 percent, something that hasn’t happened since the Great Depression. This means that in addition to spending all their after-tax income, people are also tapping into previous savings or increasing their borrowing.

It is time to revisit the 10% savings rule. This requires you start paying yourself first by saving at least 10% of what you make every month. Think of it this way, for every 10 months you save your 10 percent, you will have an entire extra month of income in the bank!

If you already follow the 10% Savings Rule, we congratulate you! You have experienced the benefits of paying yourself first. If you are just starting to implement this rule, you will need to review your income versus expenses and carefully budget your funds so you can pay all bills AFTER you have already reserved 10% for savings. Many people use automatic deposits with a set amount (equal to 10%) going to their savings account and the balance to their checking account. Another approach is to transfer 10% to your savings account every time you make a deposit to your checking account.

Our daughter has been following the pay yourself rule with her allowance since she was seven years old. She takes half of her allowance for spending money and the other half goes into a cigar box for a monthly deposit to her bank savings account. (Half is even better than 10% but she still has parents to pay the bills). As a teenager, she still follows this plan with babysitting income and other money she earns. Her goal is to save up half the cost of a car and then take us up on our offer to match the other half!

Whatever methods you use, just be sure to pay yourself first. Building wealth is really no different than climbing a mountain. Each step, no matter how small, takes you closer to your goal.