What does paying yourself first mean?
Paying yourself first is precisely what it sounds like – putting your savings goals at the head of your budget. Meaning after your living necessities, things like rent, utilities, and groceries, the rest of your income goes directly into your savings.
The “Pay yourself first” budget is a mindset. By saving, you are actively choosing your future. This can be difficult, but it is guaranteed to help you reach your goals sooner. Practicing delayed gratification is resisting the urge to spend or take that immediate “reward”. Be patient and understand that a higher-value reward is down the road.
How do I actively pay myself first?
Start with making a budget. Make a detailed list of your monthly living expenses, all necessities. These would be things like your rent, car payment, groceries, allocated gas money, phone bill, etc.
Next, decide how much you want to save. Generally,10% at the minimum. So, if you’re bringing home $2,500 a month in income, 20% would be $500, and 10% would be $250. Work within your monthly budget to allocate the right percentage for your situation to go to savings every month. No matter what percentage you’re saving, just make a plan and stick to it.
Why should I pay myself first?
Paying yourself first is a mindset. It’s about understanding the need to save now to guarantee security for yourself in the future. When you’re paying yourself first, you’re putting your future self first.
Maybe you want to buy a home one day, have a big family, or open your own business? All of these goals involve big money being spent – and going into these events with a stacked savings account will always put you in a better position for any significant life change you’re planning to make (or maybe one you weren’t planning for!).
Having an emergency fund is another reason to consistently put money into your savings. As we know, we can’t plan everything. And when an emergency happens – especially an expensive one – it can completely change your situation if you aren’t prepared.
Paying yourself first is putting yourself first. It’s ensuring a secure future. It’s protecting you, your family, and your assets. It’s understanding that saving now will always keep you ahead and ready to take on the future.
Written by Mollie Macklin
© Plinqit 2022. ALL RIGHTS RESERVED
Nerdwallet - https://www.nerdwallet.com/article/finance/pay-yourself-first-reverse-budgeting
Business Insider - https://www.businessinsider.com/personal-finance/pay-yourself-first