Updated: November 17, 2023
This article is also a Reblog episode. Click play to listen to it instead:
Paying yourself first is the simplest way to save money. I’ve learned about this concept a long time ago. It actually took me a few months before applying it, but when I did, I never stopped. I still do it until now.
Paying yourself first is very simple though it can be quite difficult to apply at first.
If you like reading books on personal finance, I’m sure you’ve encountered this advice and I surely hope that you’re able to follow it. If this idea is new to you, then read on and see how you could start investing in yourself.
How To Start Paying Yourself First
Be frugal for a period of one payday. This does not mean that you will eat instant noodles every day or walk 20 kilometers just to save on bus fares.
Live comfortably without doing any impulsive buying and committing unnecessary expenses. If this means skipping on your daily Starbucks, then so be it.
After which, see how much of your salary is left at the end of the period. From there, determine what percentage of your earnings do you want to save. I recommend starting at ten percent (10%).
This means that every payday, you will set aside that much first. No questions, no buts, no exceptions.
If that seems a lot, then try a smaller figure but make changes in your spending habits so you could increase the rate to at least 10%.
Then, open a savings account, preferably one that has no ATM card, so that it won’t be convenient for you to withdraw cash anytime. You will deposit the payments to yourself there.
Let me emphasize that this is about paying yourself first, so once you get your salary, your next step is to go to the bank and deposit the allocated percentage or you can also do an online transfer. What’s left of your salary is for your other bills and daily living expenses.
Feel free to spend all that’s left until the next salary (Yay!).
What do you do with the money that you saved?
You can only spend the money in your savings account in two ways.
First is for matters of life and death or financial emergencies. And second is for investing.
It may also be wise to hold on to the money in that account for a few months and see it grow. This will bring you a sense of accomplishment and satisfaction. After that, start looking for opportunities so that you can make that money work for you.
I’d like to end with a quote from Chris Johnson, author of the website, Wise Bread. He says, “Be proud and protective of your earnings. This money is your chance at great wealth.”
Yes, indeed it is!
What to do next: Click here to subscribe to our FREE newsletter.