To make sure you are paying yourself first regularly and building up your savings, you can follow these key steps:
How to Pay Yourself First Regularly
- Prioritize Savings Before Expenses: Treat your savings like a non-negotiable expense by automatically setting aside a portion of each paycheck into a savings or investment account before paying any bills or discretionary spending. This is the essence of the "pay yourself first" method, also known as reverse budgeting
- Automate Your Savings: Set up direct deposit splits or automatic transfers from your checking to your savings account right after payday. Automating this process ensures consistency and removes the temptation to spend what you intended to save
- Determine a Savings Amount: Decide on a fixed percentage or amount to save regularly. A common guideline is to save 10-20% of your income, but even starting with a small amount like $25 or $50 monthly can build the habit. Increase the amount gradually as your financial situation improves
- Create a Budget Around Savings: After allocating money for savings, plan your budget with the remaining funds for essentials and discretionary expenses. This simplifies budgeting and helps you live within your means while ensuring savings goals are met
- Review and Adjust Periodically: Every few months, review your savings progress and budget to adjust for changes in income, expenses, or goals. This keeps your plan realistic and aligned with your financial priorities
Additional Tips to Build Savings
- Cut Unnecessary Expenses: Identify and reduce discretionary spending like unused subscriptions or dining out, and redirect those funds to savings
- Treat Savings Like a Bill: By making savings a fixed, regular payment, you build discipline and avoid skipping contributions
- Use Tools and Apps: Many banks offer savings plans or tools to track progress and help stay motivated
- Celebrate Milestones: Monitoring your progress and celebrating savings milestones can reinforce the habit and keep you motivated
- Consider Regular Savings Accounts: To maximize interest, consider putting your savings into regular savings accounts that require monthly contributions and offer higher rates
By implementing these strategies—automating savings, budgeting around your savings goals, and regularly reviewing your progress—you ensure you pay yourself first consistently and steadily build your savings over time. This approach fosters financial discipline, reduces stress, and helps secure your financial future
