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Pay yourself first. The idea is straightforward, but many people struggle to make it stick. This approach guarantees you build savings if you apply it correctly. Below are practical tips to help you make “pay yourself first” work for your situation.
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by Gary Foreman
[et_pb_image src=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9mZWF0dXJlZF9pbWFnZSIsInNldHRpbmdzIjp7fX0=@” url_new_window=”on” align=”center” align_tablet=”center” align_phone=”” align_last_edited=”on|phone” admin_label=”Image” _builder_version=”4.27.5″ _dynamic_attributes=”src” width=”100%” max_width=”100%” height=”100%” animation_style=”zoom” always_center_on_mobile=”on” global_module=”1362″ saved_tabs=”all” global_colors_info=”{}”>[et_pb_text ul_position=”inside” ol_position=”outside” ol_item_indent=”20px” quote_border_weight=”2px” quote_border_color=”#00704a” ul_position_tablet=”outside” ul_position_phone=”outside” ul_position_last_edited=”on|desktop” admin_label=”Article Text and Headers” _builder_version=”4.27.5″ text_font=”Pontano Sans||||||||” text_text_color=”#000000″ link_font=”||||on||||” link_text_color=”#782639″ ul_font=”||||||||” ul_font_size=”22px” ul_line_height=”1.8em” ol_font=”||||||||” ol_font_size=”22px” ol_line_height=”1.5em” quote_font_size=”22px” quote_line_height=”1.8em” header_font=”||||||||” header_text_color=”#246c21″ header_2_font=”||||||||” header_2_text_color=”#246c21″ header_2_font_size=”34px” header_2_line_height=”1.3em” header_3_font=”|700|||||||” header_3_text_color=”#246c21″ header_3_font_size=”26px” header_3_line_height=”1.4em” z_index=”0″ width=”100%” width_tablet=”” width_phone=”” width_last_edited=”on|desktop” max_width=”100%” height=”1″ custom_margin=”||||false|false” custom_padding=”||4px||false|false” hover_enabled=”0″ text_font_size_tablet=”” text_font_size_phone=”” text_font_size_last_edited=”on|tablet” header_text_color_tablet=”#003366″ header_text_color_phone=”#003366″ header_text_color_last_edited=”on|phone” header_font_size_tablet=”” header_font_size_phone=”36px” header_font_size_last_edited=”on|desktop” header_line_height_tablet=”” header_line_height_phone=”” header_line_height_last_edited=”on|desktop” header_2_font_size_tablet=”” header_2_font_size_phone=”32px” header_2_font_size_last_edited=”on|phone” header_3_font_size_tablet=”25px” header_3_font_size_phone=”25px” header_3_font_size_last_edited=”on|desktop” global_module=”1205″ saved_tabs=”all” global_colors_info=”{}” sticky_enabled=”0″]
Dear Dollar Stretcher,
Some months I can save some money and some I can’t. I have heard the saying “always pay yourself first”. When I do that it seems that I have to withdraw that money later on in the month to pay the bills. So how does ‘pay yourself first’ actually work? Should I always pay myself first? Any help would be appreciated.
James
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Why Does ‘Pay Yourself First’ Work?
Many people use “pay yourself first” to force consistent saving. Instead of putting away what’s left over at the end of the month, you move a set amount into savings at the start. Thousands of households find this method effective because it changes the spending dynamic.
Think of spending like a fire: it keeps going until the fuel runs out. If you leave all your income available, expenses and small purchases tend to consume it. Raises and bonuses can disappear into everyday spending unless you protect a portion up front.
When you remove a portion of your income at the start, the amount left for discretionary spending shrinks. Many people adjust naturally: fewer impulse purchases and smaller everyday expenses lead to gradual accumulation of savings. For some this habit is enough to build a meaningful nest egg. But it’s not magical — bills still need to be paid, and discipline is required.
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‘Pay Yourself First’ Can Turn a Financial Problem Into an Advantage
Some households find that expenses and minimum payments leave nothing for savings. In those cases, paying yourself first can change the outcome. If you move even 1% of your income into savings at the start of the month, your available spending amount drops. At month’s end you may still wonder where money went — but this time you’ll know a portion was protected and earning interest.
For many, the reduced spending ability leads to fewer impulse buys and steady savings growth. For others, like James, the strategy alone may not be enough; bills and unexpected costs still need to be managed.
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Why ‘Pay Yourself First’ Might Not Be Working for You
If “pay yourself first” isn’t sticking, several common issues may be the cause:
- Lack of discipline: Some people simply keep spending until the month ends. Saving first requires resisting small impulses and accepting a leaner day-to-day budget.
- Savings target too large: If you save so much that you don’t have enough to cover essentials, you’ll need to reduce the savings amount or cut fixed costs.
- Unplanned big expenses: Home and car repairs can derail savings. Your budget should include contributions to cover predictable large hits, such as setting aside $100 monthly for an aging car to prepare for a $1,000 repair.
Adjust your plan to include realistic amounts for essentials and a sinking fund for likely repairs. That makes the “pay yourself first” habit sustainable.
[et_pb_text admin_label=”Related Inline” _builder_version=”4.27.5″ text_font=”|600|||||||” text_text_color=”#636363″ text_font_size=”26px” text_line_height=”1em” link_font=”||||||||” link_text_color=”#782639″ link_font_size=”24px” header_text_color=”#003366″ header_2_text_color=”#00704A” header_2_font_size=”30px” header_2_line_height=”1.3em” header_3_text_color=”#00704A” header_3_font_size=”25px” header_3_line_height=”1.4em” custom_margin=”||||false|false” custom_padding=”||3px||false|false” header_text_color_tablet=”#003366″ header_text_color_phone=”#003366″ header_text_color_last_edited=”on|phone” header_2_text_color_tablet=”#00704A” header_2_text_color_phone=”#00704A” header_2_text_color_last_edited=”on|phone” header_3_text_color_tablet=”#00704A” header_3_text_color_phone=”#00704A” header_3_text_color_last_edited=”on|phone” header_3_font_size_tablet=”25px” header_3_font_size_phone=”25px” header_3_font_size_last_edited=”on|desktop” header_3_line_height_tablet=”1.4em” header_3_line_height_phone=”1.4em” header_3_line_height_last_edited=”on|phone” global_module=”1365″ saved_tabs=”all” global_colors_info=”{}”]Related: Struggling to Build an Emergency Fund While Living Paycheck to Paycheck[/et_pb_text]
[et_pb_blurb title=”Build an Emergency Fund” url=”/personal-finance/ways-to-build-emergency-fund-on-tight-budget/” url_new_window=”on” use_icon=”on” font_icon=”||divi||400″ icon_placement=”left” image_icon_width=”50px” admin_label=”MyFinance Emergency Fund” _builder_version=”4.16″ header_font=”|600|||||||” header_text_color=”#003366″ body_font=”||||||||” body_text_color=”#000000″ body_line_height=”1em” max_width=”100%” module_alignment=”center” custom_margin=”15px||” custom_padding=”10px|6px|10px|6px|true|true” animation_style=”zoom” border_radii=”on|3px|3px|3px|3px” border_color_all=”#a3a3a3″ box_shadow_style=”preset2″ box_shadow_horizontal=”3px” box_shadow_vertical=”3px” icon_font_size=”50px” global_module=”3467″ saved_tabs=”all” global_colors_info=”{}”]
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Where You Put Your Savings Can Make a Difference in Your Success
Choosing the right place for your savings matters. Consider using two separate accounts:
- A short-term emergency or “big hit” account for predictable but irregular expenses like home and auto repairs. Use this only for those unavoidable costs.
- A long-term savings account that is harder to access and reserved for major goals such as education or retirement.
Separating funds reduces the temptation to spend long-term savings on short-term needs and helps you maintain progress toward bigger goals.
[et_pb_text admin_label=”Related Inline” _builder_version=”4.27.5″ text_font=”|600|||||||” text_text_color=”#636363″ text_font_size=”26px” text_line_height=”1em” link_font=”||||||||” link_text_color=”#782639″ link_font_size=”24px” header_text_color=”#003366″ header_2_text_color=”#00704A” header_2_font_size=”30px” header_2_line_height=”1.3em” header_3_text_color=”#00704A” header_3_font_size=”25px” header_3_line_height=”1.4em” custom_margin=”||||false|false” custom_padding=”||3px||false|false” header_text_color_tablet=”#003366″ header_text_color_phone=”#003366″ header_text_color_last_edited=”on|phone” header_2_text_color_tablet=”#00704A” header_2_text_color_phone=”#00704A” header_2_text_color_last_edited=”on|phone” header_3_text_color_tablet=”#00704A” header_3_text_color_phone=”#00704A” header_3_text_color_last_edited=”on|phone” header_3_font_size_tablet=”25px” header_3_font_size_phone=”25px” header_3_font_size_last_edited=”on|desktop” header_3_line_height_tablet=”1.4em” header_3_line_height_phone=”1.4em” header_3_line_height_last_edited=”on|phone” global_module=”1365″ saved_tabs=”all” global_colors_info=”{}”]Related: How To Know When To Use Your Emergency Fund[/et_pb_text]
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Should You ‘Pay Yourself First’ or Pay Down Debt First?
An important decision is whether to build savings or pay down high-interest debt. Saving a small amount at a low interest rate while carrying credit card debt at a much higher rate can be counterproductive. On the other hand, having some savings can prevent you from using credit when an emergency hits.
Reducing debt is also a form of saving: every dollar you pay toward a balance lowers future interest charges. If your debt interest is significantly higher than what you earn on savings, prioritize paying down debt. If building a small buffer helps you avoid new debt, then a modest savings habit can be justified alongside debt reduction.
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The Best Time To Start Paying Yourself First
A convenient moment to begin is when you receive a raise: direct the extra pay into savings so your take-home pay for spending stays the same while your savings grow. If you don’t have a raise, start small—$10 a month is a realistic beginning and easier to sustain. Many people spend that amount on impulse purchases without thinking.
Should James keep paying himself first? It depends on his goals. If he wants a simple habit that nudges him to trim discretionary spending, it’s a helpful tool. If his needs are to cover immediate bills or pay down high-interest debt, he may need to adjust the strategy—either reduce the savings amount or balance saving with debt repayment and sinking funds for repairs.
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- Finding Money for Savings While Paying Off Debt
- 8 Reasons You Don’t Have an Emergency Fund
- Reduce Your Debt With a “Sinking Fund”
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Reviewed August 2024
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About the Author
Gary Foreman is the founder and former editor of The Dollar Stretcher. He has been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.
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