Last Updated on 25th August 2020 by Tuppenny
You’ve probably heard the phrase, “Pay yourself first,” when it comes to finances.
I tend to use the phrase “pay your future self first”, because it’s you in the future you are going to be paying.
Not the today you.
But what does pay yourself first actually mean?
The idea behind this advice is simply that it’s important to set money aside for yourself either through savings or investing before you spend it on other things.
Doing so increases the chances that you will be able to meet your financial goals over time.
Right now you are earning, but the future you may not. Whether that is you in 5 years time or 40 years time.
The future you is going to have expenses they need money for that they cannot afford out of their usual paycheck.
Setting aside money now will help you pay for things in the future. Whether that is a new home, a new car or retirement.
The money you set aside for your future self should be considered a fixed expense and needs to be in your fixed/priority payments section of your budget each month.
Check out these reasons why it is so important to pay yourself first if you hope to meet your personal finance goals.
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Making Sure it gets done
Putting money aside in your budget for savings or paying down debt makes sure these things are accomplished.
It’s too tempting to say you’ll take care of it after you pay your minimum expenses or do it with your next paycheck.
I consider paying down debt as a way of paying yourself first because once the debt is paid off you will have more money in your bank account.
Putting things off till tomorrow or your next paycheck greatly decreases the odds of them ever actually happening.
When you pay yourself first, you make saving and debt reduction a priority.
Think of it this way:
Your future self deserves just as much as the today you.
If you spend it all today and put nothing aside for your future, who does this impact?
Exactly! Your future self, because no-one else is going to start giving you money when you need or want it are they?
When you don’t pay yourself first, there’s a far greater chance you’ll end up spending money on things you regret.
How many times have you convinced yourself you deserve X, only to realize 2 weeks later that X is not all it’s cracked up to be?
The feeling of guilt that comes from impulse buys or unintentional spending can be avoided when you prioritize and take care of the important things first.
Every time you get paid, you should plan to set aside an allotted amount for the important tasks of saving and taking care of high-interest debts.
This sets you up for success and limits the chance you’ll feel regretful about where your money goes.
Getting in the habit of allowing yourself to spend before saving sets you up for a vicious cycle of working simply to get by.
Sure, it’s nice to be able to treat yourself once in a while.
After all, you work hard and deserve the chance to enjoy your money. However, the reward of material things is short-lived.
You end up with a house full of stuff that not only clutters your living space, it clutters your mind.
And you’ve paid out your precious money for that cluttered feeling!
Even experiences like a meal out with friends will only take you so far when it comes to overall satisfaction.
Setting money aside for your future self before anything else sets you up for the larger rewards that come with saving for life’s big moments and the satisfaction of accomplishing financial goals.
Create Good Financial Habits
Paying yourself first gets you in the habit of prioritizing.
You’re able to see the benefits that come from this practice soon after you start.
Your savings starts to grow or your debt begins to shrink.
This gratification can motivate you to keep going and to discipline yourself.
This new found discipline helps you to continue to make better financial decisions that lead to greater life accomplishments.
Related post: 10 Ways For How To Manage Money Better
How to pay yourself first
I am very aware that you are likely to be living paycheck to paycheck so the idea of suddenly finding a few hundred dollars to pay yourself first each month is not realistic.
Creating good money habits doesn’t mean starting out big.
Start small, aim for an amount that stretches you just a little bit.
If you know you could find $50 each month, aim for $75.
These posts might help:
We spend to our earnings. The more we earn the more we spend.
So to start paying yourself first you are likely to need to reduce your spending.
The easiest place in my mind to free up spare cash is to look at your grocery bill and see what you can do to reduce it.
These posts have everything you need to really cut your grocery bill right down:
For even more help on tackling your grocery spending join the 7 day Grocery Budget Challenge
Save extra income
From time to time we all find ourselves with a one off bit of extra cash.
Whether that is a tax refund, a bonus from work or money from Aunt Mary.
Your budget does not (should not) include this extra income so it’s ideal for putting away and paying yourself first.
I know Aunt Mary might have wanted you to treat yourself but what better way to treat yourself than to focus on your future self?
You’ll thank yourself later, promise.
Make extra money
When you are on a low income it’s not always enough to cut your budget back.
There is only so much cutting back you can do before you are feeling the pinch every week.
How to prioritize debt repayments and your future self if you find yourself in this position?
Find a way to make a little extra money and ring-fence that money.
Ideas to earn extra money
Working overtime or extra hours is possibly the easiest and most lucrative way to earn more money.
Alternative you could take a second job that fits around your commitments.
There are many work from home jobs that pay a good income when you commit to learning a new skill.
These posts have some great ideas on money making hobbies and flexible work from home jobs:
Additionally these are some really easy ways you can earn a little money doing small things every day while at home or waiting in a queue!
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Pay yourself first and reap the rewards
Keep these tips in mind when you feel tempted to spend before putting money aside.
You’ll gain satisfaction and reward when you start to prioritize you and your future goals by paying yourself first.
Start saving money for your future self by grabbing a copy of the Money Saving Mini Bundle:
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