This Super-simple Strategy Can Make Anyone A Millionaire; Why Aren’t You Using It Yet?

Saving money CAN be easy, and successful savers have known the secret — to pay yourself first — for decades. The simplicity of automatic banking transfers makes paying yourself first even faster — and more foolproof — than ever before. If you don’t follow any other financial advice, do THIS!

Want to spend ten minutes doing one thing for your finances that will have an absolutely MASSIVE impact on your ability to spend less, save more, and reach your goals faster?

If you answered yes, then it’s time to pay yourself first.

The concept is simple: Every payday, the very first thing you do is set aside a percentage of your income in a savings account. You do this before you pay the rent, before you pay your other bills, and before you head to happy hour. You “pay yourself first”.

The strategy is simple, sure. But it’s powerful because:

  1. It puts saving first. Something amazing happens when you tell yourself you’re going to set aside money for yourself and that it’s more important than all the other things that need to be paid. Once you get used to the idea—and see your savings start to accumulate—it becomes kind of addictive. The more you save, the more you’ll want to save!
  2. It’s automatic. Once you set up an automatic transfer or split direct deposit in your savings account, you can stop replying on yourself to save money instead of spend it. (Just like me, you’re human, and we humans tend to be bad at stuff like that.)

How Paying Yourself Works

There are two primary ways to pay yourself first automatically:

  • Automatic Transfer. Most banks (and all online savings accounts) allow you to set up automatic recurring transfers between accounts. You pick the amount you want to save, the date on which you get paid, and the bank takes care of the rest. For example, if you get paid every other Thursday, your savings bank will automatically debit your checking account on the same day your paycheck hits.
  • Split Direct Deposit. If you want an even more tamper-proof method, you can ask your HR department to split your direct deposit between your checking and savings accounts (most payroll providers can do this). I say this is more “tamper-proof” because if you were ever tempted to stop paying yourself first, you would have to visit your HR office to cancel the deposits into your savings account.

Learning to pay yourself first may be the most important step to being better with money; and yes, it's this easy.

Note: I highly recommend keeping your savings account at a different bank than your checking account. (Otherwise, it’s just way too easy to comingle your funds.) Online savings accounts are great for this because they provide better interest rates and 2-day transfers back and forth to other banks. You can set them up and forget that they’re there until you really need your savings.

If You’re In Debt…

A common question I get is “I have high-interest credit card debt or student loan debt, shouldn’t I be paying that off before saving money at a measly one percent interest?” I say YES. And here’s why:

Obviously if you’re in credit card debt, getting debt-free is your financial priority. That said, I think that everybody needs:

  • A Bank Account Buffer. (To prevent overdraft fees and the temptation to use credit again for life’s little surprises).
  • To develop the habit of saving. So even if you’re paying off credit card debt, pay yourself $10 a paycheck. Then, when the debt is gone, you’ll already have the habit in place and can up the amount you save considerably.

Take it from me: Paying yourself first really works. It takes 10 or 20 minutes to set up, and then runs on autopilot. If you do nothing else to improve your finances, this would be the thing to do. You won’t regret it!

Published or updated on December 15, 2013

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


  1. To Keith Simpson:
    1. Not all banks charge fees for savings accounts. Each bank has different terms. Read the terms thoroughly before opening a new account. If you can’t keep the minimum balance or don’t meet other terms, the bank will take a fee out of the account. There many credit unions that have no-fee savings accounts, which you should look into if you are incurring fees at your current bank.
    2. You don’t NEED 2 separate accounts, but you SHOULD have 2 accounts, to keep your spending cash away from your savings money. It will help you not to spend outside your budget and accidentally dip into emergency/buffer money. If you only want 1 bank account, perhaps you can achieve the same divide by keeping emergency/buffer funds in the bank and only use physical cash for spending.
    Why should you have both checking & savings, aside from keeping savings & spending cash separate? Your emergency fund should be in a savings account, not checking because checking is too easy to spend & earns no interest. The Federal government sets limits on savings accounts, such as only 6 withdraws per month. This increases stability of the account in theory and allows the bank to invest your money, earning you interest. Checking accounts do not have limits on withdraws and therefore earn you no or relatively limited interest. If you make fewer than 6 withdraws per month, don’t use debit cards, checks & ATMs, you might not need a checking account. I had only a savings account until I was 24, and my employer deposited my paycheck into my savings (1 way to avoid fees). I withdrew spending cash from a teller once a month. Everything else stayed in the account for my emergency fund.

  2. Q. Why do your bank take money out of my savings account if it’s a savings account. Q. Why do you need a savings account separate from your checking account?

  3. Have you checked out SmartyPig? I’ve just started using them. I like that it automatically withdraws from my checking account. Since I’m self-employed I can’t use this feature from my handy payroll department ’cause it’s just me! allows you to share your savings goals (kids college, home downpayment or nursery decor anyone?) My kids love it. We’re using it to save up for our next adoption. The kids always want to know “what’s in the pig mom?”
    SmartyPig is free, and offers an EXCELLENT rate, and it’s a transaction engine in front of a real-live bank.

    Good luck in your savings,

  4. I’m lucky enough to have just paid my car off. I’ve started taking that money surplus and splitting it in half. Every month half is going to an FNBO Direct account, and the other half is going into a non-retirement mutual fund account (earmarked for future cars and/or emergencies). It never bothered me to shell out the money on a car, so before I even got used to having that extra money around, I redirected it.

    On top of that, I’ve had a 401(k) through work, and a Roth IRA, for several years. So far, I’ve got nearly a year’s worth of my current salary between my 401(k) and my Roth (I’m 28).

  5. I turned 29 last month, and I have had things automated for a while. I pay myself first by saving a little over 30% of my take home every month, divided between my regular bank savings account (for expenses a few times a year like car insurance), a high yield savings account, and my IRA. I started saving for retirement when I could enroll at my first job, and then rolled it into that IRA when I left. I work for a small company now with no retirement plan so I continue to fund the IRA.

    My goals for 2009 are to start doing other kinds of investing, open a Roth IRA, and buy a new Mac and software so I can do more freelance design work to supplement my income.

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