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Why you should (almost) always pay yourself first

When you pay yourself first, you set aside money each payday and dedicate that money to reaching your financial goals — like saving for retirement. This approach prioritizes your long-term financial health from the get-go and minimizes the chances that you'll waste money on impulse purchases later.

The concept of paying yourself first is simple: Every payday, the very first thing you do is set aside a percentage of your income for your future goals before spending it on discretionary items or living necessities.

Paying yourself first means recognizing your financial priorities, even if it also means spending less in other fun categories. Instead of waiting to save what is left over at the end of the month, you save first and then spend what is left over.

What does it mean to pay yourself first?

Paying yourself first can mean investing money for retirement, building up an emergency fund, or stashing money away for a down payment.

For example, let’s say you earn $60,000 a year and want to buy a car in six months. You decide to start saving $800 a month for a down payment. To track your progress easily, you open a separate savings account just for that goal. Every month, you will transfer $800 to that savings account right after you get paid.

Garnishing your wages increases the odds that you’ll save the down payment amount within your identified timeframe. On the other hand, if you simply waited until the end of the month to see how much is left in your checking account, it will probably take you a lot longer to come up with the money for a car.

Why should you pay yourself first?

Paying yourself first isn’t just about how much money you can save. It’s about building the habit of saving early, even if you can only afford to save $10 a month. You can always increase the amount you save once you start earning more money. But the longer you wait to begin the habit of saving, the harder it will be for the habit to stick.

Woman dancing under a cascade of falling cash
Source: Tenor

Paying yourself first will also teach you the importance of planning ahead for the future. It may help you become happier and more fulfilled because you’ll have laid the financial groundwork to follow your dreams and pursue what’s really important to you.

How to pay yourself first

1. Create a separate savings account

To start paying yourself first, open a separate savings account dedicated to your financial goal.  It’s best to keep the money separated from your everyday checking account so you don’t accidentally end up spending it.

If you don’t already have a high-yield savings account (HYSA), now is a good time to open one. A high-yield savings account (HYSA) is the best place to store your savings because you’ll earn more interest than a regular savings account. HYSAs are liquid, so you can access the funds at any time.

GIF of a man making a 'no' gesture with his hand
Source: Source: Tenor

If you’re easily tempted to spend money, consider opening a HYSA at a different bank from your checking account. This will make it harder to transfer money back to your checking account and could help you stay on track.

You can open as many savings accounts as the bank allows. Personally, I have 10 different savings accounts for various goals. This lets me stay organized and aware of how much I have saved for each specific goal.

2. Change your direct deposit

If you are paid via direct deposit, you can change your selection to have part of your paycheck immediately diverted into your savings account. This way, you won’t have to move money out of your checking account into a savings account.

Contact your payroll administrator and ask to change your direct deposit settings. You can choose to divert a particular percentage or dollar amount, whatever your preference is. It may take one or two paycheck cycles for the changes to go into effect.

3. Set up automatic transfers

Banks let you create automatic transfers from one account to another. Setting up automatic transfer is one of the easiest ways to pay yourself first, because you don’t have to remember to do it.

To get started, decide how much you want to save monthly for each goal. Then, log into your bank account and click on the transfers section. From there, follow the instructions to set up automatic transfers. Internal automatic transfers are usually free, but some banks and credit unions may charge a fee if you’re sending money to an external account.

Automatic transfers can be stopped or edited at any time. For example, if you reach your savings goal early, you can stop automatic transfers for that account.

4. Track progress

When you’re saving for a goal, it’s important to monitor your progress to keep up motivation. Some banks will provide their own goal-tracking features. If your bank doesn’t offer that option, you can keep a manual record on your fridge or bathroom mirror.

Having a visual reminder of your goal may help you stay the course, even when you’re tempted to stop.

GIF of a woman saying 'That's progress'
Source: Giphy


How much should you pay yourself first?

How much you should pay yourself first depends entirely on your income, current savings status, and financial goals. It also depends on where you live, your family situation, and other personal factors. For example, a married couple in a low cost-of-living city may be able to save more than a family living in NYC with three kids.

If you’re saving money for retirement, a common rule of thumb is to save between 10% and 15% of your income. Your emergency fund or rainy day fund should have between three and six months worth of expenses.

Aside from those rules, there is little expert guidance on how much you should save for each goal. It all varies depending on when you want to achieve the goal and how much you can spare each month.

Is paying yourself first right for everyone?

GIF of a woman saying, 'wallet full of debt'
Source: Tenor

If you have credit card debt with a high interest rate, you should pay that off first before diverting funds to a savings account. Credit cards have notoriously high interest rates, and you’re better off focusing on eliminating that debt before achieving other savings goals. Once you’ve paid off all high-interest debt, then you can focus on saving.

Paying yourself first may also be hard for those living on an extremely low income. If you barely have enough money to cover the essentials, saving may be out of reach for now. In that case, you should focus on increasing your income before routing money to savings.


Paying yourself first is not meant to be a deprivation exercise. Instead, it’s supposed to help you reach long-term goals and build the future you envision. If you focus on paying yourself first, you’ll wake up one day and have money for that house you want to buy, the vacation you want to take, and the business you want to start.

Featured image: marekuliasz/

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