Save Up


Paying yourself first is a concept that’s easy to understand but hard to put into practice. That’s often because there are some things in your life that just aren’t optional.

You pay your bills, then buy groceries and get a few things you can’t live without. Then – and only then – you go ahead and stash a few dollars for other things, like building an emergency fund, saving for a down payment for a new house or putting money toward retirement. Sound familiar?

The problem with this approach is that it’s a foolproof way of paying yourself last, not first. After you’ve spent money on everything else, there might not be much left. Time marches on, but your savings aren’t growing. What can be wrong?

Don’t beat yourself up. You’re hardly alone. Per the 2015 Bankrate survey only 37 percent of people said they had savings available in case of an emergency.

The good news: it’s easy to learn how to pay yourself first by getting a clear understanding of where you stand and slightly tweaking the ways you do things.

5 Tips to Pay Yourself First and Save More

1. Learn How to Make a Budget

The key to planning your budget is knowing the difference between your fixed and variable expenses. You can’t avoid or delay paying rent or the mortgage, property taxes, and all kinds of insurance policies you might have: health, home, rental, or car insurance. Fixed expenses are easy to budget because you are usually paying the same amount in a certain period of time.

Then, there are variable expenses, like utilities. Variable doesn’t mean irregular: utilities are a regular expense, but they may vary depending on the time of the year. Your grocery bill can go up and down from month to month, but it’s never going to be zero. When your car has depreciated to a certain degree, you will spend more on maintenance. You also need clothes, shoes, and other occasional necessities, but you don’t buy them every day.

The most important thing is to budget your fixed and variable expenses separately from each other. Fixed expenses stay the same unless your lifestyle undergoes a dramatic change, like buying a house or a new car. Variable expenses are trickier. To budget for variable expenses, try to look back. See how much you’ve spent in the last month, quarter, and a year and set your future goals accordingly. And don’t sweat it if you don’t get it right at the beginning – we’ve all been there.

2. Cut the Fat

After you’ve determined what you must have in your life, cut unnecessary expenses. For instance, do you need to pay $150 for cable every month or spend hundreds of dollars a month to eat out (or order in)? Are you sure you can’t exist without your daily lattes?

The same Bankrate survey indicates that people are ruthlessly cutting down on restaurant meals, cable TV and specialty coffee. Follow this trend and find opportunities to change some frivolous behaviors.

Then, there are small recurring expenses that can seriously add up after just a few months. Think about all these memberships you don’t use or subscriptions you don’t need — these magazines you got a great deal on 2-3 years ago, are still collecting dust and taking extra space in your apartment. And you keep paying for it.

3. Build an Emergency Fund

One of the most important strategies for how to pay yourself first is setting up and contributing to an emergency fund. Most financial experts recommend three to nine months of living expenses, while others cut you some slack by recommending three to six (with a caveat that it might not be enough).

The truth is, there is no universal formula for building an emergency fund. Once you know what your fixed expenses are, ask yourself a few simple questions. How do you feel about your job security? What’s your current health situation and medical coverage? Do you have good enough credit to rely on short-term loans from your credit card if you find yourself in a tough spot? What is the amount of your typical monthly expenses?

Once you know the answers, decide how much you need in your emergency fund.

4. Aim for the Stars

Don’t limit your savings aspirations to necessities, like an emergency fund or retirement. Aim for brighter things in life, too. Save for the latest gadget or a fancy spa day. Save for a weekend getaway or any other luxury that makes you feel good. Saving money for small indulgences in your present life will give you a positive reinforcement and motivate you do an even better job in the future.

5. Set It and Forget It

Put your savings on autopilot. Don’t make it easy for yourself to dig into your savings by mixing the “Pay yourself first” account with your regular banking account. Instead, open a separate account and set up a direct deposit from your paycheck. This is the ultimate way to pay yourself first. The automation will save you a lot of time, while reducing the lure of “borrowing” from your piggy bank.

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