Pay yourself first to get your budget on track

The simplest and most effective budgeting technique you can use is to pay yourself first. Prioritizing your savings the same way you would prioritize a credit card payment almost ensures financial success over a long period of time.

Setting your savings rate

The first step is to choose a savings rate that you can easily manage even if it is 1% of your pay. Ideally this figure increases over time until you are saving a large percentage of your wage. For those wanting to retire early, you might need a percentage over 50%.

Then when you get paid, before doing anything else at all, transfer your savings into a separate account where it can be visually and physically separated from the rest of your pay packet which is to be spent.

After saving, pay your bills

Next comes paying your bills, paying off any credit card balance (in full if possible!), pay rent and other regular expenses. If you find yourself not being able to pay your credit card off in full then you simply need to spend less money. It is that simple. If you can’t make the full payment, pay the largest amount you can whilst still leaving enough to scrape by until you are paid again.

Ideally, you are left with a small amount of money left over after saving, and all other expenses are paid – this is what you live off until you are paid again. This amount is for food, fuel, entertainment and other miscellaneous spending.

Keeping this as a small amount is ideal because it forces you to limit spending naturally, and it forces you to think about what you are spending your money on. Remember that even small purchases are worth thinking about!

If you have money left over

If when you get paid after paying yourself first for a while, then it probably means you’re not being ambitious enough with your savings rate. Take the left over amount an work out what it is as a percentage of your wage and then add it to your savings rate. If you have 5% of your pay left over, add it to your savings rate.

Pay yourself first hurdles

If you are someone that struggles to make your minimum credit card payment, then it will take time to shift to this sort of strategy.

It will require a shift in your thinking – and you simply have to start by spending less money, bit by bit, until you are saving more (hopefully much more) than you earn. The best way you can get started is to symbolically start paying yourself first, even if that is just a single percentage of your wage.

Gradually increasing your saving rate will require you to re-think the sort of spending that got you into credit card trouble in the first place. Focus on what you want to achieve financially – put pictures of a bucket-list travel destination, a holiday home or whatever big picture goal you are worried you might not be able to achieve if you don’t start saving soon.

The first step is to pay yourself first – take the money out of reach by saving it, and then dealing with the left over money the best way you can to get you through to the next pay.


Soon enough, you will be worrying about whether you can make your ‘savings payment’ because it’s really ambitious, rather than worrying if you can make your credit card payment.

While there are many obvious benefits of having savings, an emergency fund or buffer, but some of the best features of paying yourself first are:

  1. Saving first, spending the rest forces you to budget properly by physically limiting access to money – just make sure you don’t compensate by using your credit card more
  2. It makes you recognize that saving money should be your first financial priority by making you deal with it first
  3. Forces you to evaluate your spending by giving you less of it to live off after saving
  4. You just get used to living off less money – it makes you realize that saving really isn’t that hard
  5. It just works – there isn’t any better savings strategy that I know about – it is habit forming and quite addictive after you get into the swing of it
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