How to Pay Yourself First

These small actions that you repeat over time are the difference between success and failure. For example, if you run 1 mile every morning, you are likely to be in better shape than someone who periodically runs 5 miles on a Saturday. I think this applies to everything – including your finances.

The problem with small actions is that they’re small. When you want something, you want it now. I’m the same way. I would much rather have my student loan debt gone tomorrow by winning the lottery than by paying a few thousand every month. But for most of us, this isn’t how success happens.

The best hack I’ve learned is to do something small repeatedly over time, even though it’s less sexy than having it happen all at once.

For example, five years ago I decided to set a New Years Resolution to start flossing. The idea was to make my resolution small and practical so I actually did it. Well, it worked! Five years later, and I’m still flossing every day. I cannot imagine life before flossing and don’t understand how everyone doesn’t floss. This probably seems really insignificant, but actually, it’s critically important that you floss if you want to good teeth when you’re older.

What’s my point? You can actually do something very small and repeat it over time to make a huge difference in your life. It’s the same idea with working out or anything else that you want to achieve. Small actions repeated over time will move you up the success curve.

You can apply this principle to your money. For example, instead of manually writing down a budget, I use my free Personal Capital account to track all my accounts and stay organized. It’s the habit of using these systems that has made budgeting easy for me.

The ONE Habit That Will Help You Save More Money

This brings me to the biggest habit that I believe can help you save money and it is automate paying yourself first.

This means that every time you are paid, whether it’s monthly, bimonthly, or in some other interval, put money into a savings account or investment account (or wherever you are saving your money).

This requires you to put this money aside before you pay your bills. Scary, I know! But this one habit can change things for you. If you feel broke when you’re not saving money, you’ll still feel broke using this method, except you’ll have a savings account to show for it.

You don’t have to make it unmanageable. Start small. Automate saving $20 / month if you have to. Write down your budget and see what you can actually afford to pay yourself. Then, put a system in place to make that happen.

To automatically pay yourself first, set up an automatic transfer with your bank from your checking account into your savings or investment account. Alternatively, if your work permits it, you can set up direct deposit into a savings account. The key is to have it set up reoccurring, automatically so you never see the money and have to make a choice whether to spend it or save it. There will always be things to spend your money on, so this choice will be hard if you give it to yourself. Instead, remove the decision and automate your savings.

How This Can Help You

The biggest benefit of automating your savings so you pay yourself first is that you actually will save money. If you pay yourself at the end of the month and things are tight, you will likely run out of money – again, there is always an expense that comes up. But if you pay yourself first, you’ve already spent the money (on yourself!).

The biggest benefit to having money saved (i.e.: having an emergency fund) is that when things happen they will still be bad emergencies but they won’t cause money fears in you. What I mean is that when you have an emergency fund and money saved, the emergency still sucks, but it’s not scary to pay for because you can use your emergency fund.

Paying yourself first is a habit that can help you stop living paycheck to paycheck.

My Challenge to You

My challenge to you is to put money into savings as soon as you get your paycheck. Of course, this challenge should be considered with your other financial goals (debt payoff, for example). Or maybe you already have a fully funded emergency fund and don’t need to save money right now because you’re focusing on something else. Only you know what you’re money looks like. But if you’re in a position of living paycheck to paycheck and need to find a way to build up a decent savings, then implementing this habit can help.

A Final Note!

Sometimes, it’s not new information that is life changing. Instead, sometimes, it’s putting information into action that you already knew.

You may have heard that you should “pay yourself first” but you may not be doing it. If you’re not and you’re living paycheck to paycheck, finding it hard to save money, implement this one habit – automate paying yourself first. This can be the one habit that propels you on the upward curve toward a successful financial foundation.

You may also find these posts helpful when it comes to getting your finances on track and stopping the paycheck to paycheck cycle:

  • How to Organize Your Finances in 8 Steps
  • 10+ Resources for Your Money
  • 6 Tools That Will Teach You How to Budget
  • How to Increase Your Income

It’s the little habits repeated over time that make all the difference! Saving money is no exception.