Financial experts of all walks of life have agreed, you should be paying yourself first every time your pay check comes in.
Don’t know what this means? I didn’t either. It’s not a tricky concept, but it’s one that you should definitely understand.
Paying yourself first is a general rule that means that when your pay check comes in, your savings should get the first cut. This is called paying yourself because that savings is to support you in the future. Some people naturally do this, but others are the exact opposite, paying absolutely anything except their savings account first.
Let’s talk about which is better.
The benefits of paying yourself first?
- Less chance of going back into debt when paying off cards
- Re-enforces the good habit of saving
- Wise spending on yourself, not overspending
When you pay yourself first you are doing several great things for yourself, the best of which is prioritizing saving. Making saving as a priority enables you to fund your own future, even if you’re currently in debt it allows you to see the way out.
Speaking of debt, you also won’t have to keep using it as you’re trying to pay it off, because you’ll have both savings and debt repayment already worked into your plan.
The other benefit is that there’s no set right or wrong amount to pay yourself. It doesn’t have to be 50% of your pay check, it just has to be a committed amount that you stick to to grow your savings account.
How do you start paying yourself first?
The easiest way to pay yourself first is to take the time to settle on an amount, and then to automate that savings contribution. This removes all choice from the matter, and easily supports the positive habit of saving.
If possible, it’s best to pay yourself before you even get the chance to see how much money you’ve made. This removes excuses like “I just don’t know if I have enough this time”.
As you continue this great habit, your savings account will grow. You’ll get to see the result of your hard work quicker than you ever would otherwise, and all that had to be done was save first.