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Financial Wellness
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Mind
Pay Yourself First: What It Means & Why You Should Start Doing It
June 17th, 2021 at 3:45 pm
Do you have a hard time sticking to a budget? As recommended as it is, the 50:30:20 rule doesn’t work for everyone. In order to successfully manage your personal finances, you must make sure that your budget is specifically designed for your income and expenses. If you’ve noticed that you’re unable to save 20% of your salary because of your spending habits, try paying yourself first.
What is paying yourself first?
Paying yourself first puts the focus on saving first and then spending. With your savings contribution for the month moved out of the way, you’ll be able to spend what’s left without feeling guilty or worrying about eating into your savings. If this method works for you, it can be an extremely effective way to reach your savings goals each month. These consistent contributions can help you build long-term wealth!
Why should we pay ourselves first?
Of course, you can’t withdraw money from your savings account – unless it’s an emergency. The more you save, the more prepared you’ll be for financial emergencies, such as pay cuts, car repairs or hospital stays. If you’re unable to save because of your income, try reducing your expenses. Please don’t be ashamed of seeking financial assistance if downsizing still doesn’t work for you – there is nothing wrong with needing support.
How do we pay ourselves first?
Once your salary comes in, start by moving 10% of your income to a savings account. Don’t get too comfortable with that rate – observe your spending habits for the month and see how you can save more. Slowly increase the percentage each month until you find one that’s right for you and your financial goals. You can then automate this savings rate for more efficiency!
Paying yourself first takes away the burden of constantly having to track your expenses, which is a habit that many of us have trouble sticking to. Instead, it helps us build the more inviting habit of accumulating wealth. Keep experimenting with budgeting and saving, and remember not to be too hard on yourself. At least once you pay yourself first, you’ll feel a sense of reward and won’t feel guilty about spending money later that month.
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