Pay Yourself First: Why and How to Prioritise Saving

With the cost of foods, rents, transportation and seemingly everything increasing at a blistering pace, saving money via Pay Yourself First, may be a herculean task.

With the right budgeting strategy, however, saving money could be easier. Budgeting can help you pay down debt, save for retirement or afford a major expense, like a house, car or vacation.

It is imperative that we save for the rainy days. Sometimes, a wise man is parsimonious as he wants to live behind several charitable bequests in his will.

Paying yourself first budgeting is sometimes referred to as “reverse budgeting” because your savings goals are prioritized instead of your expenses. The simplest explanation is that paying yourself first means depositing a portion of each paycheck directly into your savings.

Many financial experts say the first step towards paying yourself is to know how much you earn; that is your net pay (after taxes). They recommend saving 10 percent to 20 percent of your income.

 How To Implement The “Pay Yourself First” Strategy

If the “pay yourself first” strategy sounds appealing, here are the steps to get started.

Set clear goals: Determine your savings goals. Are you saving for an emergency fund, a down payment on a house, or retirement? Knowing your target will help you figure out how much to set aside each month.

Determine a savings percentage: Ideally, aim to save at least 10% to 20% of your income (the exact percentage will depend on your financial situation and goals). Start with what you can afford and gradually increase it over time.

Automate your savings: One of the most effective ways to pay yourself first is by automating the process. Set up automatic transfers from your checking account to a savings or investment account. That way, you don’t have to remember to do it each month.

Adjust your budget: After allocating your savings, adjust your budget to live off the remaining income. This ensures that you’re covering necessities such as rent, utilities, and food, but still be mindful of discretionary spending.

Track your progress: Regularly monitor your savings to ensure you’re on track toward your goals. If possible, try to increase the percentage you’re saving over time.

Tips for Keeping It Consistent

Start small: If saving a large percentage seems daunting, start with a smaller amount and gradually increase it as your financial situation improves.

Make it non-negotiable: Treat savings like a fixed expense. Once you’ve set aside money for savings, don’t touch it unless it’s for an emergency.

Review your progress annually: At least once a year, evaluate how much you’ve saved and consider adjusting your contributions if your income has increased or your goals have changed.

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