13 Jan ‘Pay Yourself First’: One Way to Trick Yourself into Saving
“Pay yourself first” is a phrase that many savvy savers use frequently to remind themselves of the importance of saving money alongside paying the usual monthly bills. The idea behind it is this: treat putting money into savings like you would any other bill, and you’re more likely to do it. It helps eliminate the excuse that many people make after paying all of their typical bills—that there simply isn’t enough money leftover to put into savings.
“Pay yourself first” is a mindset that has one goal in mind: to make it a habit of saving money. Here are some ways that you can bring the “pay yourself first” mindset into your own financial life.
Decide on a “payment” amount.
When you take a look at your budget, how much can you really spare to reserve for savings? Are there things that you could cut out of your monthly spending in order to reserve more money for putting into savings? Decide on a realistic amount of money that you can pay yourself every month by putting it into savings. If you’re a young working professional, for example, maybe a good place to start is $100 or $200 every month.
Decide where your “payments” will go.
Is there somewhere that you’d like to be adding more savings to on a monthly basis? Perhaps a savings account, emergency fund, “future purchase” fund, 401(k), or Roth IRA? To start with, choose one place where you’ll send your monthly payment to yourself. Maybe you’ll make it a habit to move a certain amount of money into your savings account on the 1st of every month, or maybe you’ll set up an automatic funds transfer for your Roth IRA account. This is where you say to yourself, “I will send x dollars to x account on this day every month.”
Treat it like you would a monthly bill.
Probably the best way you can ensure that “paying yourself first” every month remains a habit is to treat it like you would any other bill. In fact, treat it like your most important bill. Put money into your savings at the beginning of the month, before paying your typical bills and using any of your discretionary money, so that you won’t find yourself making excuses at the end of the month for not contributing to your savings.