How Paying Yourself First Can Help You Save More

How Paying Yourself First Can Help You Save More

There comes a time in everyone’s life when they realize they’re going about their budget wrong. Your personal epiphany might have happened when your tax return comes back saying you owe the IRS, and your savings aren’t big enough to cover this unexpected bill. Or maybe you’re simply spending too much on fun things like vacations and takeout and have nothing left to put towards a safety net for your future. Whatever sparks your realization, the problem lies in the fact you’re focusing on the wrong areas of your budget.

If you’re tired of meagre savings that never grow, it’s time you learn the value of paying yourself first. Keep scrolling to learn why this simple technique can boost your savings with little planning or effort on your part.

“Yourself” means your savings

Paying yourself can sound misleading — as if you’re giving yourself a paycheck to deposit into your account. That’s not what this means. This isn’t another stream of income, like a side hustle or part-time job. You don’t need to employ yourself to achieve this technique, but it does involve depositing money.

How does it work?

This method makes your savings account and/or investments as important as any other bill in your budget.In fact, professional financial advisors suggest paying these accounts before you pay any other bill. In other words, you transfer funds into your savings as soon as you get paid, then you use the remainder of your check to pay for the necessities.

The paying yourself first method doesn’t come naturally to most people. After all, most people are taught to prioritize debts to landlords and payday loan direct lenders. If you find it hard to make the switch, set up automatic transfers to deposit money when you get paid. That way you aren’t tempted to spend the money you should have reserved for savings on other things.

Sometimes saving is hard

When you aren’t used to ordering your bills this way, it’s easy to mess up. It might take you a while to balance your budget, so it’s normal to find yourself short from time to time — especially when emergencies like vet bills or household repairs completely blindside you. When you need a little help, cash lenders make it easy to cover these bills with installment loans that work quickly to re-establish order in your budget. Lenders like MoneyKey have broken down many of the barriers stopping people from securing loans. They’ve simplified the borrowing experience so you can get installment loans online from MoneyKey in as fast as one business day after you’re approved.

These lenders are great for momentary emergencies, but they aren’t meant to become a permanent fixture of your budget to pay for necessities like rent. That isn’t healthy. Neither is consistently spending all your remaining cash on stuff you don’t need, leaving you with nothing to put towards your retirement. If you can’t pay yourself first without their help, you should speak with a financial advisor.

Why does this method make it easier?

You avoid missing utility bills and rent payment because there are consequences to paying these necessities late or not all. Miss them and eventually your utility provider will cut off its services or your landlord might evict you. However, missing the “due date” of your savings doesn’t have the same immediate effects on your living situation, but it does have long-term consequences that make it difficult to pay for emergencies or prepare for retirement.

When you pay yourself first, it forces you to make a safety net. It also forces you to adapt to a smaller budget. When you skim a portion of each paycheck automatically for savings, you’re left with less money to cover the rest of your budget. It’s important that you make yourself spend less on frivolous things like entertainment and takeout, so you can still pay your remaining bills. That way the effects of your automatic savings won’t negatively impact your living situation.

It may be hard at first, but you’ll adapt eventually. You can make it easier by investigating automatic online savings accounts and mobile apps that help manage your money. You can also speak with a financial advisor to learn how you can start paying yourself with IRAs, mutual funds, and other investments.

Though it may feel strange to pay yourself first, it’s one of the most successful savings techniques you can try. Give it a shot and watch how your savings grow.

Categories: Finance

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