Have you ever heard of the concept of paying yourself first? This simply means that before you pay for anything, including your bills, you put away a certain amount of your income to save. Your first bill that you pay every month would be to yourself. Yes, you read that correct. You would consider your savings account like a bill.
Do you find yourself saying that you will stash away some of your next paycheck to put into your savings account but never actually do it? The problem that arises is that after you have paid for all of your monthly expenses like your mortgage, car payment, utilities and groceries, there is nothing left. Literally, you have no money left at the end of the month to possibly put into your savings account.
This turns into a never ending cycle. Now, do not get this confused with spending money on yourself each month. Paying yourself first means saving the money before you spend it on anything else. Most people wait and try to put away whatever is leftover, but often times there is nothing left at the end of the month.
The purpose of paying yourself first is to ensure that you are contributing to your financial future by building your savings account and contributing to your long-term goals. This is important before you even consider spending any money on entertainment or other non-necessities throughout the month.
The best way to start this process is by having a plan. In order to create a plan you need to be utilizing a budget. If you do not already have a monthly budget worksheet you can print this free template.Find out how you can prevent having a $0 balance in your savings account #budgeting Click To Tweet
It is important to know how much money you have coming in and how much is going out each month. Make sure you can AFFORD to pay yourself first. You cannot pay yourself first if you do not know how much money you are getting and paying out every month. You need to be able to pay your bills each month.
I found this fun quiz that will give you insight into your financial situation. It will tell you areas you can focus on and how to improve.
My results were spot on! It will only take a minute and it is cool to see the results. Below you will find a few ways that you can pay yourself first.
Ways to Pay Yourself First:
Have a plan in place.
Before you can start paying yourself first, you must have a plan in place. Know how much money is coming in and how much is going out. Make sure you can AFFORD to pay yourself first. After you have a plan in place, here are some ways you can pay yourself first.
I recommend using a monthly budget. A lot of people get scared when they hear the word budget, but it does not have to be something that is drastic. In order to manage your finances you need to know where you money is going. A budget will help you to see all of your income and expeneses and each month and help you to make wise financial decisions.
You cannot pay yourself first if you do not know how much money you are getting and paying out every month. You need to be able to pay your bills each month.
Have money go into a separate savings account.
If you want to pay yourself first, select a certain amount of money and put that into a separate bank account. If you do direct deposit, this can be done without you ever thinking twice. The money will be in the separate savings account when you need it.
This is the whole idea behind paying yourself first. It is automatically done for you. As soon as you receive your paycheck you will pay your own savings account first.
Get rid of any extras your family isn’t using.
Trying to find money to pay yourself could be the problem you are trying to solve. Again, having a budget will help you to see where you are spending your money and how you can cutback. This may be a challenge but it will pay off in the end. Consider cutting cable, or getting rid of gym memberships and magazine subscriptions.
Find ways that you can save everyday. Cut back on dining out and you can start to pay yourself more money at the beginning of each month. There are plenty of ways to cut down on food costs that will help you to increase your savings account.
Live off a portion of your income.
Some people literally spend every dime they make and never get ahead savings wise. Do not live paycheck to paycheck. One way to pay yourself first is to live off of only a portion of your income. This will be tough to do, but you can save up so much money this way!
Living below your means will help you to make wise financial decisions.
Get a side gig.
Another way to really build up a savings account is to get a side gig. Save every dime you get from this side gig and don’t use it for anything else. This will really allow you to pay yourself first!
If you make an extra $100 then figure out a set amount and pay yourself first. I know it is tempting to spend the extra money you made but you will be much happier in the long-run when you can build your savings account. You never know when an unexpected cost will occur.
Paying yourself first is never easy. It seems as though money flies out your hands the second you get it. However, if you don’t learn to pay yourself first, you’ll never save up money and you’ll always be in the same financial situation you’re in now. I hope you’ll take my advice and apply it to your life in small but BIG ways!
Do you pay yourself first?