Pay Yourself First

Pay Yourself First is a foundation principle of money management. Though it’s simple to understand, in reality very few people know how to use the principle. If you don't understand and use it, there are certain financial products that are using this principle against you too.

The phrase “pay yourself first” means that instead of paying all your bills and expenses first and then saving whatever is left over, do the opposite.

Set aside money for investing, retirement, college, a down payment, or whatever requires a long-term effort, and then take care of everything else.

Because the savings contributions are automatically routed from each pay-check to your investment account, this process is said to be “paying yourself first”; in other words, paying yourself before you begin paying your monthly living expenses and making discretionary purchases.

This simple system is a very effective way of ensuring that individuals continue to make their chosen savings contributions month after month. It removes the temptation to skip a given month’s contribution and the risk that funds will be spent before the contribution has been made.

Regular, consistent savings contributions go a long way toward building a long-term nest egg, and some financial professionals even go so far as to call “pay yourself first” the golden rule of personal finance.



	

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