[Insert Your Name Here] Account: Paying yourself first
Its payday! That push notification from your bank saying “direct deposit of $xxx into 1234 acct.” is waiting for you on your lock screen. Definitely feels good after a long week at work. I’m sure we all do a little happy dance in our head for 2.5 seconds. But answer this: what is the first thing you normally do after receiving that check? Depending on the time of the month, most of us are making transfers to pay our rent, phone bill or that Apple Music subscription. Then we might set money aside for the weekend’s festivities. Finally, whatever is left after our other financial obligations gets saved. But why do we make saving the last thing we do? Put yourself at the top of the list by prioritizing personal savings. Pay yourself first!
So what does paying yourself first mean anyways? It means to prioritize the act of saving before addressing your bills and discretionary spending. So before you set aside money to go to brunch or even pay the light bill, you’re saving money for the future. And the savings can be for anything you want; the downpayment on your dream home, retirement, or even building your emergency savings to a healthy amount.
Now I know some of you are probably looking at your screen like “this guy is nuts” ... but hear me out. No, I am not saying forgo paying your electricity bill or miss a credit card payment just to save money. However, prioritizing saving on a consistent basis enables you to build wealth due to the compounding interest that your money will earn. Additionally, as you reach certain milestones, it provides a physiological reward which can boost your morale. And for those thinking “I don’t have enough”, it might be time to evaluate your expenses and see where you can adjust (e.g. only having Netflix instead of all the streaming services).
Paying yourself first might sound difficult to some people, but DWM has you covered. Here are three actionable tasks we can all implement to start paying ourselves first:
Contribute to your employer sponsored retirement account (e.g 401k, TSP) . Since the saving will occur before you get your check, you don’t feel the direct impact to your pockets. Also, a lot of employers these days are matching your contribution to a certain percentage. Who doesn’t love free money?
Similarly, try to opt into sending a percentage of your paycheck to an account other than your everyday account. This is another guaranteed way to see those savings goals increase in value without you lifting a finger.
Automate your savings transfers. Most institutions allow you to set recurring transfers from one account to another. Setting up a recurring transfer will not only free up your time from manually doing it every time you get paid, but it will hold you accountable for those savings goals.
Whether you do one or all three of the above tasks, the main goal is to make saving for the future a priority. Make a pinky promise to start paying yourself first. You won’t regret it once you start! As always, I want to hear from you. Do you pay yourself first? What ways do you pay yourself first?
Holding you accountable,
DWM