It may seem unrealistic to talk about paying yourself first when you’re faced with so many other financial obligations. Yet, while it’s critical to pay all your bills on time, saving for your future can’t always take the back seat. When you pay yourself first, you pay yourself (usually via automatic savings) before you do any other spending. In other words, you are prioritizing your long-term financial health.
If you make a habit of depositing or moving money into your savings account every time you are paid, you may be less likely to spend it on your everyday expenses. This practice can help you foster a habit of saving that will add up over time and help you be prepared for large or unexpected expenses.
If you're having trouble finding ways to pay yourself first, try taking these steps to get into the habit:
Figure out how much you can afford to save.
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Review your budget.
If you take a close look at your expenses, you may find that even small changes in spending habits, such as turning off unused subscriptions or revisiting discretionary expenses, could create big savings over time. -
Utilize available tools.
Wells Fargo customers can utilize tools like My Savings Plan® to set up a plan and keep track of progress.
Set a personal payment goal.
Create a savings strategy.
Once you’ve found the money you need to pay yourself first, it’s important to find a smart way to save those funds until they’re needed. You can start by moving money into a savings account regularly with each paycheck.
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Ask your employer to split your direct deposit
so that an amount or a percentage goes directly into your savings account before you can spend it. -
Another savings strategy is to set up an automatic transfer for each payday,
regularly sending money from your checking account to your savings account. This can help you get used to managing living expenses with what looks like a smaller paycheck, when actually you’re building up your own savings. -
How to set up automatic transfers.
If you’re a Wells Fargo customer, it’s easy to transfer money into your savings when you have a checking account. Simply sign on to your account, and look for the Transfer and Pay tab to get started. You can set up, modify, and cancel transfers as needed. The most important part is to stay consistent and to treat the money you’ve saved as if it’s off-limits, except for its intended purpose or a true financial emergency. -
Establish a dedicated savings account.
If you don’t already bank with us, check out a Way2Save Savings account as a way to start the habit of saving automatically.
If you expect to receive additional money like a tax refund or bonus, make a commitment to yourself to set aside a portion of those funds and boost your savings.
You may not immediately see the benefit of paying yourself first, but don't get discouraged. If a financial emergency arises, this strategy can help you weather the storm. Ultimately, paying yourself first is about putting yourself first, which helps make sure you’re prepared for whatever’s yet to come.
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FAQs
It means setting aside a realistic portion of your income every time you get a paycheck and before you start spending it on anything else. The first goal is to save enough for an emergency fund that will cover the cost of a crisis. Keep saving and it will turn into a fund that can be tapped for other needs and wants.
What does pay yourself first mean when it comes to saving group of answer choices? ›
Answer: Paying yourself first means that when you get a paycheck, tax refund, cash gift, or other money you should put some of that money in a savings account before you pay your bills.
Is paying yourself a good strategy for saving? ›
It means putting 20% of your income toward savings and 80% toward everything else. Paying yourself first can be effective because it ensures you save something every pay period, and it reduces the chance that you'll spend money you intended to save.
What is the pay yourself first savings strategy? ›
"Pay yourself first" is a personal finance strategy of increased and consistent savings and investment while also promoting frugality. The goal is to make sure that enough income is first saved or invested before monthly expenses or discretionary purchases are made.
What is rule number 1 of paying yourself first? ›
When you pay yourself first, you pay yourself (usually via automatic savings) before you do any other spending. In other words, you are prioritizing your long-term financial health.
What does it mean to pay yourself first responses? ›
Generally, “pay yourself first” means what it says—set aside money for savings before paying bills and making other purchases. But it's still important to keep up with debt obligations.
Which is the best example of paying yourself first? ›
Contribute to your retirement savings.
Another way to pay yourself first is by contributing a portion of your salary to a 401(k) plan. The way this retirement savings plan is structured is that your employer sends money from your paycheck directly to the account every time you get paid.
What are the benefits of pay yourself first? ›
Paying Yourself Pays Off
Saving toward retirement and building up a substantial emergency fund improves your long-term financial health; saving up for major expenses can help make big financial goals like homeownership or college possible.
What is the pay yourself first equation? ›
Subtract your monthly income from your monthly expenses.
If your monthly income is $2,000 per month, and your total expenses are $1,600, you technically have $400 to pay yourself first with. This gives you a good baseline idea of how much you may be able to save each month.
What is the 50/30/20 rule? ›
Do not subtract other amounts that may be withheld or automatically deducted, like health insurance or retirement contributions. Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
“By paying yourself first, you can avoid some of the common obstacles to savings, like overspending and running out of money to put into savings or simply forgetting to put money aside for savings while you focus on other goals,” says Heidi Johnson, director of behavioral economics at Financial Health Network.
What strategy is most effective for saving money? ›
The 5 Most Effective Strategies To Save Money For The Future
- Set Your Goals Early On. Setting a financial goal early on will boost you to stick to your savings plan. ...
- Understand Your Cash Flows. ...
- Open a Savings Account. ...
- Rethink Debit Cards. ...
- Monitoring Your Spending. ...
- Revise Your Emergency Fund.
Pay yourself first is a strategy for maximizing savings over time by setting aside a portion of your monthly income in savings before you do anything else with the money, whether it's paying your mortgage, buying groceries, or signing up for yet another streaming subscription.
How does Robert Kiyosaki pay himself? ›
When Kiyosaki was broke, he decided with his wife that if they wanted to achieve their dreams, they had to pay themselves first before paying their creditors. This is where they came up with the 10/10/10 plan, where every month, they treated this money that they set aside as an expense instead of an asset.
What bills should always be paid first? ›
1. Mortgage or Rent Payments. A safe home for you and your family always comes first, so paying your rent or mortgage should always be your highest priority payment.
How much should a person save in order to be financially secure? ›
At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.
What does "pay yourself first" mean in Quizlet? ›
paying yourself first means: putting some of your income into a savings account before paying bills, buying personal items before paying bills.
What does it mean when you pay for yourself? ›
It's the golden rule that will set you apart from people who are just scraping by from month to month: Pay yourself first. It means setting aside a realistic portion of your income every time you get a paycheck and before you start spending it on anything else.
What does save yourself first mean? ›
The concept of paying yourself first means that you set aside money in your budget for savings and financial goals before budgeting for anything else.
What does pay yourself first mean in business? ›
Paying yourself first is a financial principle that says you should contribute to saving for your goals before using up all of your money on bills and discretionary spending.
