You’ve probably heard the phrase, “Pay yourself first,” when it comes to finances. However, you may not be exactly sure what that means or how it can benefit you. The concept behind this advice is simply that it’s important to set money aside for yourself either through savings or investing before you spend it on other things. Doing so increases the chances that you will be able to meet your financial goals over time. You should treat this money as a fixed expense and make accommodations for it within your budget each month. Check out these reasons why you should pay yourself first if you hope to meet your personal finance goals.
Prioritize
Putting money aside in your budget for savings or paying down debt makes sure these things are accomplished. It’s too tempting to say you’ll take care of it after you pay your minimum expenses or do it with your next paycheck. Putting things off in this manner greatly decreases the odds of them ever happening. When you pay yourself first, you make saving and debt reduction a priority.
Limit Regret
When you don’t pay yourself first, there’s a far greater chance you’ll end up spending money on things you regret. The feeling of guilt that comes from impulse buys or unintentional spending can be avoided when you prioritize and take care of the important things first thing. Every time you get paid, you should plan to set aside an allotted amount for the important tasks of saving and taking care of high-interest debts. This sets you up for success and limits the chance you’ll feel regretful about where your money goes.
Increase Reward
Getting in the habit of allowing yourself to spend before saving sets you up for a vicious cycle of working simply to get by. Sure, it’s nice to be able to treat yourself once in a while. After all, you work hard and deserve the chance to enjoy your money. However, the reward of material things is short-lived. Even experiences like dining out with friends will only take you so far when it comes to overall satisfaction. Setting money aside for yourself before anything else sets you up for the larger rewards that come with saving for life’s big moments and the satisfaction of accomplishing financial goals.
Create Motivation and Discipline
Paying yourself first gets you in the habit of prioritizing. You’re able to see the benefits that come from this practice soon after you start. Your savings starts to grow or your debt begins to shrink. This gratification can motivate you to keep going and to discipline yourself in ways that allow you to continue to make better financial decisions that lead to greater life accomplishments.
Keep these tips in mind when you feel tempted to spend before putting money aside. You’ll gain satisfaction and reward when you take care of paying yourself first.
