If you’ve been struggling to save and are wanting to build solid financial habits, here’s how to pay yourself first.
Treat Your Savings Like a Bill
To effectively pay yourself first you need to treat your savings like it’s a bill. Pick a certain day each month (preferably a pay day) and decide what amount you’re going to save and where you’re going to save it.
Each month when that day comes up save the money. Pay yourself just like you would pay a bill.
Have it Automatically Deducted
The strategy that has been most effective for me in paying myself first is to automate my savings. I have certain income streams automatically saved each month – I don’t even see the money.
Since my money is automatically saved it’s out of sight, out of mind. I don’t think about the money and I definitely don’t spend it. I run my personal finances as if that money isn’t even there.
I do the same with retirement and my daughters’ college savings accounts.
Make Your Money Hard to Access
There’s no point in paying yourself first if you’re going to turn around, withdraw your savings, and spend it. Because of this I recommend that you keep your money in an online savings account that is separate from the bank you have your checking with.
When you use an online savings account it will take a few days to transfer the money back to your checking. Since you can’t immediately access this money you’ll be less likely to spend it and impulse purchases will become impossible.
Save a Specific Income Source
If you’re feeling frustrated because you want to pay yourself first but just do not have the money to do it you’re going to have to get creative.
Your first option is to find some bill to cut and save the amount you had the bill reduced by each month. Your next option is to find some other way to earn money (even if it’s as little as $20/week to start) and save every penny of that extra cash.
Paying yourself first is one of the best ways to build financial stability and is a habit that you can benefit from for the rest of your life.