Pay Yourself First: A Budgeting Tip

A really awesome financial adviser once gave me some powerful advice about saving money. During our conversation, I was hesitant to put a high percentage of my income into my savings account because it felt like a waste. If I couldn’t touch it that month, what was the point of working so hard? Know what she said?

You have to pay yourself first.

Treat it like a bill that you have to pay, she recommended, and pay yourself first every month. She explained that later down the line, this money that I’m putting away (and not spending on going out to eat, to the movies, or other short-term activities) will directly benefit me.

She asked questions like:

What would you do if you lost your job? Could you pay rent for a month or two while you find a new one?

What would you do if your car breaks down and you have to buy a new one? (I live in Atlanta, so a car is necessary!)

How could you afford a big medical payment if anything were to happen?

My answer was a concerned silence. I hadn’t thought about it. Sure, there are many ways to work something out in those situations, but most include getting involved with a credit company, a high interest percentage loan, and spending a lot more money than I should.

Then she asked, What would happen if you paid yourself, your future self, a little bit each month? What if you provide yourself a safety net?

Suddenly, it really made sense. Saving money is the opposite of a waste. It’s insurance. Powerful insurance for negative scenarios that seem pretty common in life. I quickly realized that if I lost my job and didn’t have a healthy savings account, I would likely be evicted from my apartment or face penalty charges for leaving my lease early. That in itself was a scary thought, especially for someone who scoffed at savings previously.

I’ve decided to pay myself first.

My future self will thank me. In fact, my “future self” already has. When I needed a big cash deposit for my new apartment, my savings account was ready to help. In fact, if I hadn’t been paying myself, I wouldn’t be in my new place right now.

How can you pay yourself first?

Really, it’s easy. For the short term, open a savings account at your local bank and set up an automatic monthly (or each pay period) transfer from your checking account to your savings. The interest return won’t be very high, but it will always be accessible in case of an emergency. If you already have money saved, consider talking to a financial adviser or learning about investing it in order to (hopefully) get a higher return rate. In either case, it’s a good rule of thumb to save at least 10% of your take-home income each month. Think about it like this:


Of course, feel free to invest more than 10% of your income each month in yourself, but 10% is a very reasonable (and not too difficult!) start. Plus, you leave yourself plenty to do everything you’d like to with your money while still investing in your own future.

Don’t forget! The key is to pay yourself first. If you wait weeks from being paid and put money into savings when your bank account looks smaller, you’ll probably hesitate to put in a full 10%, or not put any money away at all. If you pay yourself first, that money never really exists in your checking account! So after a few months, you don’t even miss the money.

Truly, I think this is some of the best financial advice I have ever received, and I hope it inspires you to do everything you can to take care of your future self now!

Bonus tip from MFA Editors: If you company offers a 401K plan with a match, make sure you sign up to save at least enough to get the full match. One of our bloggers recently got a new job where the company offers 4% match if you save 5% of your salary. What that means is that for every $1 she saves, her account actually increases by $1.80.  It’s like earning 80% interest on your money!  (Find out about “vesting” from your personnel department, to figure out how long you have to stay with the company to fully own that extra money.)

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Author My First Apartment

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Sarah is a dog lover and advocate for conversation & laughing at your own jokes. Since finishing her college career in communications, she began working (and living) in Atlanta. After living in a few different apartments over the last few years, she's ready to share experiences. Stay tuned for adventures, tips and advice!

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