Pay Yourself First

Pay Yourself First

When you receive your monthly income, do you pay yourself first, ahead of all the other bills? It’s a question you may not have thought about much. Not properly.

But assuming you do consider your future life to be important, you need to make an investment. That means balancing what you spend now against what you want to enjoy in the future.

One of the most effective strategies for building up financial security – if not the most effective strategy – is to prioritise automatic, regular savings before everything else i.e. pay yourself first.

Unfortunately, most people don’t do this. The most common approach to savings is to receive your salary, pay the mortgage or rent, loan repayments, household bills, groceries, holidays and socialising and then see what’s left at the end of the month.

If you value yourself and your future financial security, this is the wrong way round. You need to flip the approach and adopt “reverse budgeting”.

Why Pay Yourself First?

  • It’s a behaviour that says “I matter”. You prioritise your long-term financial wellbeing and create more of a balance against the relentless short-term bills, purchases and entertainment.
  • It builds financial confidence as your see the value of savings and investments grow over time. Because it becomes habitual, you don’t even miss your regular savings contributions after a while.
  • Financial discipline becomes one of your strengths as you watch your wealth grow. Over time, you’ll find ways to cut back on unnecessary expenditure and boost the amount you save.
  • Wealth doesn’t just happen. You need intention, action and time. That doesn’t mean it’s difficult – you just need to follow some easy steps to make it happen.

How to Pay Yourself First

  • Decide an amount to begin with. Don’t worry too much about what is the right amount – just start by creating the habit. £50, £100, £500 per month…..whatever you feel is manageable.
  • Automate your savings. Set up a standing order so that money comes out of your salary account immediately after payday and goes into a separate savings or investment account that you can’t dip into so easily. If you have a Save As You Earn scheme available at work, take advantage of it.
  • Increase your savings periodically. As you get used to making the payments, challenge yourself to increase your standing order every so often, especially if you get a pay rise or if any of your other bills decrease.
  • Don’t break the habit. Make sure you pay this ‘bill’ every pay day without fail, don’t be tempted to dip in to the savings except for genuine emergencies. This is a long-term investment in yourself, so treat it with the same importance as your mortgage or rent.
  • Start now. Don’t wait for your next pay rise. Don’t have one last month of spending freely. Don’t wait until after Christmas. Do it now, however small, just set up that standing order to start the habit.

What about debts?

If you are paying off mortgages, car loans, credits cards etc, the same principle can help reduce those debts more quickly. Arrange over-payments straight after pay day, but you could still consider allocating even a small amount towards savings. This can help build up an emergency fund, that may help you avoid taking out more debt in the future.

If you’re considering taking on new debt, possibly to fund a new car or house purchase, set aside a ‘Pay Yourself First’ amount before deciding what’s affordable to borrow. This might mean lowering your expectations on the next big purchase, but it comes back to creating that balance between spending now and your future financial wellbeing.


‘Pay Yourself First’ is one of the golden rules to building wealth. It’s more about developing a financial behaviour than anything else, so to begin with, you don’t need to worry too much about how much to save or where to put your money.

In time, you can explore more about the financial products available, such as ISAs, pensions and others. And once you get used to your automated payment, you’ll become confident to increase the amount you save.

So, just make a start. Open up a separate savings account, if you don’t have one already, and set up a standing order with your bank. Then sit back and let your money and automatic payments do the work.

Often, a feeling of overwhelm, competing priorities and procrastination prevents action. Financial coaching can help you gather your thoughts, prioritise, and keep motivated. Breaking it all down into small, step by step actions will get the results you want.

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