Pay yourself first

Each month you settle down to pay bills. You pay your mortgage lender. You pay the electric company. You pay the trash collector. But do you pay yourself?

Our expenses have a way of taking up whatever amount of income we have. And it is really hard to save money when you pay all your bills first. That is why the first bill you pay each month should be to yourself. Approach it the same way that you treat your phone bill or your electric bill. Pay it first.

Even if you are living paycheck-to-paycheck, you must get into the habit of setting some amount of money aside toward a savings goal. Paying yourself first is a tried-and-true method of reaching financial goals.

Like any habit that’s good for you, it can take time to be dedicated to saving a portion of each paycheck but once you get the hang of it, you'll be fine.

What does “pay yourself first” mean?

Paying yourself first simply means putting money into your savings account first – as soon as you get paid and before you spend money on anything else.

How to do it

Figure out how much you can afford. If you take a close look at your expenses, you may find that even small changes in spending habits, such as bringing your lunch to work or making less frequent trips to the salon, could create big savings over time.

Don’t be afraid to start small. No matter how tight the budget, there’s always a way to pay yourself first. It’s just a matter of finding a little money here and there that you won’t miss.

Set up a pre-authorized debit to make it easy, and to make sure it happens. This puts a predetermined amount into savings automatically. If you keep on putting off saving money, you’re never going to get into it.

Every little bit that you save today will help you out massively in the future.

You may not immediately see the benefit of paying yourself first, but don't get discouraged. If a financial emergency arises, this strategy can help you weather the storm. Ultimately, paying yourself first is about putting yourself first, which helps make sure you’re prepared for whatever’s yet to come.