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.
Tip
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
What is a 'pay yourself first' budget? The "pay yourself first" method has you put a portion of your paycheck into your savings, retirement, emergency or other goal-based savings accounts before you do anything else with it. After a month or two, you likely won't even notice this sum is "gone" from your budget.
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? ›
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.
What is rule number 1 of paying yourself first? ›
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. Automatic transfers can make it easier to pay yourself first.
What are the cons of pay yourself first? ›
Cons. Potential downsides to paying yourself first include: Transferring too much to savings: Not keeping enough money in your checking account can be harmful for your finances. Always keep a cushion in your checking account to avoid paying overdraft fees and possibly monthly service fees.
What is the 50/30/20 rule? ›
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.
Which is the best example of paying yourself first? ›
"Paying yourself first" simply involves building up a retirement account, creating an emergency fund, or saving for other long-term goals, such as buying a house. Financial advisors recommend measures such as downsizing to reduce bills to free up some money for savings.
What does Robert Kiyosaki mean by pay yourself first? ›
The goal is to pay yourself first and always to have money to invest. Once you have money for investments, you should learn about assets worth investing in so that your money grows faster than the inflation rate. As always, we suggest you conduct due diligence before investing your hard-earned money.
What does it mean to pay yourself first quiz? ›
paying yourself first means: putting some of your income into a savings account before paying bills, buying personal items before paying bills.
Why is it important to pay yourself first? ›
The Bottom Line
Paying yourself first encourages sound fiscal habits. By automatically deducting a portion of your income, you can set the money aside before you rationalize ways to spend it. Still, it's important to be practical.
Pinpoint a realistic amount using the 50/30/20 approach. This method allocates 20% of your monthly income to savings and debt repayment, 50% to necessities and 30% to wants. With a $3,400 monthly income, for example, you'd reserve no more than $680 for savings and debt repayment, $1,700 for needs and $1,020 for wants.
What is the most effective strategy for saving? ›
The 50/30/20 budget
A good goal is spending 50% of your income on needs; 30% on wants; and 20% on savings and debt paydown beyond minimums. (Your budget may look different if you're just starting out or live in a high-cost area.)
What bills should always be paid first? ›
Which Bills Should Be Paid First? Generally, the bills you should pay first are the ones that cover necessities — the main resources that keep you and your family safe and healthy. These necessities include shelter, water, heat and food. Once necessities are paid for, focus on expenses related to your vehicle.
What is pay yourself first a priority to make sure that? ›
Paying yourself first means saving money before using it for bills and other spending. This approach to budgeting protects against financial emergencies and provides for future opportunities. Automatic transfers from your paycheck to dedicated accounts for saving are an easy way to make paying yourself first work.
Do 90% of millionaires make over $100,000 a year? ›
Choose the right career
And one crucial detail to note: Millionaire status doesn't equal a sky-high salary. “Only 31% averaged $100,000 a year over the course of their career,” the study found, “and one-third never made six figures in any single working year of their career.”
What is the pay yourself first savings strategy Quizlet? ›
paying yourself first means: putting some of your income into a savings account before paying bills, buying personal items before paying bills.
How can I save my first $100000 fast? ›
Five tips to help you save $100,000 faster
- Live below your means and cut frivolous spending. ...
- Be hyper-aware of every monthly expense and ruthlessly cut back to save faster. ...
- Pay down high-interest debts like credit cards first. ...
- Find the financial institution that will get you the highest interest rate.
The advantage of "paying yourself first" out of your paycheck is that you build up a nest egg to secure your future, and create a cushion for financial emergencies such as your car breaking down or unexpected medical expenses. Without savings, many people report experiencing a large amount of stress.
What does the 60/20/10-10 rule represent? ›
Put 60% of your income towards your needs (including debts), 20% towards your wants, and 20% towards your savings. Once you've been able to pay down your debt, consider revising your budget to put that extra 10% towards savings.
