Paying Yourself First: The Saving Rule That Is Helping Me Build Wealth

| January 19, 2018 | 0 Comments

If you have done your homework, then you have probably read about one of the “golden rules” of finance. Finance experts are telling you to do it, money how-to books are shoving it down your throat, most finance blogs are praising it, but what the heck does it really mean?

For the longest time, I would budget my money just like I was supposed to. I would write out my expenses and then determine how much I was going to budget for each category. I did well sticking to my budget, and every single month I was paying all of my expenses on time. At the end of the month, if I had money left over, I would put it into my savings account at the bank.

What I didn’t know at the time was that I was doing it all wrong. Yes, wrong!

Even though I was paying all of my bills and I was sticking to a budget, I was still making a crucial error with my money. I was saving my money after paying for everything else.

Today, I want to give you that aha moment! That moment you realize that you too, might be making a crucial error with your money.


Just reading the rule “pay yourself first” might seem a little confusing. The first time I heard this rule I thought to myself, “But I’m not self-employed. How am I going to pay myself?”

I was thinking about it all wrong. I thought paying myself first was referring to how I earn money, not how I save it.

The phrase simply means paying your own savings before paying expenses or any other budgeted costs. For example:

Many people say they can’t or don’t save enough for retirement, or save enough for unexpected costs because they don’t have enough money to save more. They feel they are already saving as much as they can because that’s what their “leftover” money is telling them.


Here’s your aha moment.

Pay into these accounts first. Before your bills, before you pay for groceries, before you get gas or pay your utilities, pay your savings FIRST. Treat it like a bill. You need to approach it the same way you treat your phone bill or mortgage payment.

In fact, prioritize it above all of your other bills. Make it the most important “bill” that you pay.

Always, always, always pay it first.

If you approach your savings as your most important bill, it increases your chance of saving a substantially higher amount. Saving money is no longer just a desire, it’s a necessity. Feeding your retirement or your emergency fund savings is a bill that MUST be paid EVERY.SINGLE.MONTH!

Once I adopted this mindset, my whole thought process on budgeting and saving money changed. It made me realize that not only did I have enough to save more, but that investing in myself was more important than the electric company or my landlord.

Building wealth is empowering and can become one of your most powerful motivators.


What if you pay yourself first and there is not enough money left over to pay your bills?

Hey, I get it. I was once there. In fact, I remember being in this exact situation. People’s number one fear with paying themselves first is not having enough leftover to make ends meet.

If you are living paycheck-to-paycheck and are having a hard time keeping up with your bills, it’s easy to think you will literally run out of money before the end of the month.

For me, I started paying myself first when I barely had enough money to pay my bills. I committed to paying myself first anyway. Once I committed to treating my savings as a top priority, it forced me to find a way to pay my other bills. It sounds crazy, right?

But it literally forced me to look at my budget. To find areas where I was overspending, and to cut out unnecessary expenses. Paying myself first suddenly became more important than spending $100 every month on eating out.

The “what-if” of paying myself first was hard to overcome at first. I started out small and increased my saving payments as I went along. The more I saved, the more I WANTED to save!


A commonly asked question I get it is “I have high-interest credit card debt or student loan debt, shouldn’t I be putting all of my resources into paying that off first before saving money?”

My answer is always, no!

It’s a hard concept to grasp, but hear me out.

If you’re in credit card debt, getting to a point where you are debt-free is a financial priority. That being said, there are still things you can do save money first.

There are always two things I recommend people do.

Create a bank account cushion.

If you are continually leaving just a couple of dollars in your checking account, overdraft fees are a reality. It also leaves you with nothing if unexpected expenses come up.

Am I telling you to fully fund your emergency savings account with three to six months worth of expenses? No. I’m saying that having a little buffer in your checking account is a crucial step when you’re in debt.

It saves your from daily fluctuations and makes paying bills automatically a lot easier. It gives you peace of mind that you won’t get slapped with overdraft fees if you decide to pay a bill a few days early or have to pay for an unexpected birthday present.

I recommend having about one week’s worth of income as a checking account buffer. Keep it in your checking account and don’t spend it unless necessary. If you do end up spending it, make sure you replenish it.

When you are dealing with debt, it’s important to keep your checking account cushion no bigger than necessary, and then funnel all extra money to paying down your credit card balances. The most important thing is making sure you’re not going into even more debt because you can’t afford life’s little mishaps.

Develop a savings habit.

When I was in credit card debt, I still managed to save $25 every paycheck. Even though my focus was on paying off my credit cards, I was still developing a habit of saving. Then, when my debt was gone, I already had the practice in place, and I was able to increase my saving payments considerably.

I know saving a small amount seems pointless, but it’s never about the amount that you save when you’re in debt, it’s about getting comfortable doing it.


The best way to develop any habit is to make the process as effortless and painless as possible. Make saving money automatic. Turn it into background noise that you no longer notice. Make it invisible.

I can’t stress how important this is. If you set up to have money taken from your paycheck before you receive it, you won’t be tempted to spend it, and eventually, you’ll forget that it’s missing.

Here are three painless ways to start paying yourself first;

  • Take advantage of your retirement plan through your employer – such as a 401(k). This is especially important if they are offering to match your contributions. When your employer matches what you save, it’s like giving you free money. Never say “no” to free money.
  • If you have earned income, starting a Roth IRA is a really smart move. Not only will your investments grow tax-free, but you harness the extreme power of compound interest (and returns).
  • Open a personal savings account at your bank or online, and set up automatic transfers into this account. Have the money pull from your paycheck directly or from your regular checking account. Remember, treat these automatic payments as the most important bill that you pay.

One way I am paying myself first is through automatic transfers. I get paid twice a month, on the 5th and the 20th. I have my credit union automatically transfer money from my checking to my savings account on the 10th and 25th. Setting up regular recurring transfers between accounts is easy, and you get to pick the amount and date in which it happens.

Another way I pay myself first is directly from my paycheck. I asked the accountant in charge of the payroll at my work to send a check to my investment account directly from my paycheck every month. The money is saved before I even see it.

This makes saving “tamper-proof.” Saving money is easier if you make it harder to access or have to go out of your way to stop it. By going through my employer, I would have to contact our company accountant to cancel the deposit into my investment account, which helps if I was ever tempted to stop paying myself first.


Trust me, paying yourself first is vital and works. It takes 10-20 minutes to put it on autopilot and can be a game-changer for your finances. It doesn’t matter if you are starting out with $10 a month or $100, the point is to start. Take that first step!

To start taking action today, take a hard look at your expenses. Even the smallest changes in your spending habits can give you some extra funds to pay yourself first, such as bringing your own lunch to work, skipping your morning coffee run, or taking fewer trips to the salon.

Set a personal savings goal. If you can only afford a small amount right now, look for opportunities to increase your payments in the future.

Determine how much of your monthly salary you need to set aside to meet your financial goals, such as paying for a vacation or saving for your child’s college education. Then, find all of the ways you can make changes that will impact your expenses in the long-term.

Once you have determined how much you can save, make paying yourself first easy. Try setting up automatic transfers at your bank. Don’t forget about the option to take money directly from your paycheck as well. Talk to your HR department about sending money to your savings first before giving you your paycheck.

This will help you get used to managing your living expenses with what looks like a smaller paycheck when actually your are building your own savings and wealth.

Remember, stay consistent. Treat your saving payments as the most important bill. Make it your top priority.


Note: This article originally appeared at The Budget Mom.

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Category: Personal Finance

About the Author ()

Hi there! I’m Kumiko, or just call me Miko. I was tired of living paycheck to paycheck and feeling hopeless. So I paid off $7,500 in credit card debt and became an Accredited Financial Counselor® I created The Budget Mom to share my knowledge and to keep me accountable as I strive to live a life I love on a budget that I can afford. Here you will find tips for saving more, spending less, and some ideas on how to make life a little bit easier.

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