Catching the fever from learning the first and second laws Mary taught Paul in the past few months, Paul tells Mary he is ready to learn to learn the third law. Mary takes a few moment to judge for herself whether Paul is ready or not when she informs him that she will teach him the third law since the first two laws would be for nothing without the third law.

Live on less than you earn so you can have a surplus to get you out of debt and invest in assets that appreciate.

Paul objects that he does not have any money left over after paying the bills and spending on stuff for his wife and two kids. Mary explains the time-proven wisdom of paying yourself first before living with the balance of his income for the rest of the month. This means Paul need to trim his expenses so he can afford to pay the bills and monthly expenses after paying himself first.

Together, Mary and Paul list all the debt Paul owes, credit cards, car payments, the IRS, and his mortgage. Mary helps Paul understand by paying an extra $300 on top of one of his monthly credit card payment, he could pay it off in two months. Once he does that, he can roll the extra $300 plus the monthly payment onto the next credit card and pay that off in 4 months.

(Editor’s note: This is the popular “Snowball” effect you hear about everywhere.)

Remembering what Paul discovered after his quick lesson, he sat down and began to go over every bill he was paying on. He discovers his family could cut back on eating out by having picnics instead, combine their checking accounts until they could qualify for free checking, eliminate extras on his phone bill, ironing his clothes at home instead of taking it to the cleaners, and many more. After getting his family to agree on trimming their expenses, Paul discovers they could live on less than they spend after paying himself first.

This knowledge fires Paul up and he digs deeper and discovers even more ways to trim his budget so he could pay himself even more. Here, a chart is given to us to show how much you would have to save each month to become a millionaire by the time you are 65. That is assuming a 12% annual return on your investment.

Paul shares with us one last word of wisdom on the third law from Mary,

…look at the amount you are saving not as a sacrifice,

but as a payment to yourself to help achieve your most desired financial goals.

What do you spend on that you could trim to save to pay yourself first?

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