When it comes to saving money, you’ve probably heard people say, “Pay yourself first.” What does the “pay-yourself-first” model look like, and is it the right choice for you?
Employing this approach can help you manage your personal finances while putting a greater emphasis on savings. Here are a few points to keep in mind.
When you budget, you plan how you’re going to spend your monthly income. Paying yourself first means knowing how much you need to cover your bills, then finding a comfortable amount to put in your savings share each month. Once you’ve determined that amount, you make that “payment” into your savings account as soon as you receive your paycheck.
The amount you save shouldn’t compromise your ability to manage your necessary monthly expenses. It’s also helpful to set up automatic transfers for your set savings amount each pay period so that you don’t have the opportunity to spend it.
Regardless of your financial situation, when you pay yourself first, you’re contributing to your future. You can change your savings plan to fit your unique needs, too, whether that’s adding to your emergency fund, putting money into a retirement account, or paying down personal debt.
Paying yourself first enables you to plan for the future, leveraging your savings to achieve long-term goals. To do so, you may have to adjust your budget and the amount you save each month, especially if you have an irregular income. But never compromise on making that contribution toward your savings account, even if you can only afford to put away a few dollars.
Having savings goals can be a strong incentive if you’re working toward something fun, like a luxury that would typically fall outside your budget. Your goals can also be more practical if you’d rather spend your savings on a functional item. Here are a few ideas.
Paying yourself first has many benefits.
There are many common misconceptions about paying yourself first.
At PSECU, members take priority. Member-owned digital banking offers a convenient, refreshing way to manage your finances. At PSECU, our Members Achieve More. Our digital banking tools allow you to manage your savings on the go, and our educational resources help you make your wallet work for you. To enjoy these benefits and more, become a member today.
For additional tips on saving and money management, visit our WalletWorks page.