Forget Saving Money. Just Pay Yourself First

pay yourself first

Have you ever promised to yourself to start saving money but never actually get around to doing it–however how hard you try?

If you have, believe me you are not alone.

Saving money – especially saving consistently for years – is a tough thing to do. It takes hard work and discipline to a different level, which makes every day seem like a battle against our human nature to go where the road is nice and smooth and easy.

While it’s true that starting your nest egg is no walk in the park, there is actually a fire-and-forget method you can do to make it seem effortless: Pay yourself first.

Why pay yourself first?

At some point, you might have experienced an unusual burst of energy and enthusiasm to build a considerable nest egg for your future. Maybe you realized how enormous the financial responsibilities you have as an adult so you want to prepare for them. Or maybe you were inspired by the story of a successful person who rose from rags to riches by saving money to start a business. The next day, you wake up full of hope for the future.

But then over the next few months, you lose steam. Your motivation has petered out, got lost in the daily grind, worries and distractions. You realize it’s easier said than done so you get over your wealth-building fantasies.

Saving can wait. The bank is just across the street, anyway.

Sadly, this is a story many of us are familiar with. One day, we are full with vigor and enthusiasm, the next day the fire dies out.

This is the reason we need to build a system of saving money that is automatic and will not depend on our internal condition.

Why paying yourself first worksSee if debt settlement is right for you

There are two reasons why paying yourself first works:

1. It builds a habit, which as we know, becomes automatic. When saving becomes a habit, you no longer have to fight your urge to overspend because saving money is already a part of you.

2. Paying yourself first establishes an objective and uncompromising way to set aside money. Objective because you take a fixed percentage off your income, and uncompromising because you do this every month, regardless of how you feel, whether you like it or not.

The right formula

Majority of us do it this way.

Income – Expenses = Savings

As you can see in this formula, saving gets the last priority. Done this way, it’s unsurprising that we cannot really save as much as we have to. Or we only save when we have something left after our paycheck has been distributed to our creditors and “service providers.” What’s worse is we often find a way to pat ourselves in the back and say: “Never mind, you can do better next time.”

But months fly by and next time never arrives. Procrastination has taken over and you have built the habit of living paycheck to paycheck. You can’t keep living that way. Your formula doesn’t work. I suggest that you try this formula instead:

Income – Savings = Expenses

That means you keep a part of your income first even before you pay your bills and satisfy your wants.

How much you should keep depends on you, but I suggest at least 10% of your income. If you are young and have few financial obligations, you can afford to increase your savings by even up to 40% of your income. Done every month without excuse, this formula will do wonders for your savings.

If you still have money left to spend, you can spend it without guilt because you have already paid yourself first.

You might ask: So it’s okay to delay paying my creditors?

Straight answer is no, it’s not. It is still your obligation to pay back your creditors on time with what’s left of your income. There is no quick fix to doing this. It’s just plain old discipline plus a little bit of resourcefulness and diligence. You might have to switch to cheaper choices, recycle stuff, cook your own food, or work on side jobs if you find yourself short of budget.

As one quote says: “Use it up. Wear it out. Make it do or do without.”

In other words, do whatever is possible for you to afford paying yourself first.

That sounds like hard work!

Yes it does, but it’s a little price to pay now than pay it later with financial hardship or a lifetime of financial bondage.

Moreover, being able to save some amount even if you are trying to pay down debts will give you a psychological boost because money is a form of reward for yourself. And when you see yourself making small but consistent victories in saving money, your motivation grows and so does your savings.


All too often we fail to appreciate how little things, when done consistently over time, can add up. Remember how a seemingly small 2.5% interest rate can make your debts grow in just a few months?

Just like little debts, small savings done consistently by paying yourself first will add up over time and grow big enough to make up a significant part of your wealth.

Doubt it? Try it the next time you receive your paycheck. It doesn’t matter if you start small as long as you start and keep at it.

It’s no use if you aim to start big but fail to do it consistently because this is more of a marathon than a sprint.

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