How To Save More Money By Paying Yourself First: From analyzing data from a Gallup poll, nearly two thirds of Americans prefer to save money over spending it. With that being said, that does not mean Americans are always successful at saving. Most people spend their whole month’s income on their monthly income on fixed expenses — rent or a mortgage, utilities and car payments, to name a few — and then groceries, gas and other necessary expenses. You might promise yourself you’ll deposit whatever is left over into your savings account, but the problem is that there’s nothing left over because you spent it all during the month.

You can’t end the problem of having no savings unless you treat your savings like a regular expense that must be paid monthly; one of the best techniques to save money is to pay yourself before you pay for anything else. Here’s how you can pay yourself first, and why it’s so important to do it. How To Save More Money By Paying Yourself First

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How To Save More Money By Paying Yourself First

• How to Pay Yourself First How To Save More Money By Paying Yourself First
  • Each time you receive a paycheck, your savings is the first expense you should take care of. The easiest way to pay yourself first is to set up a regular automatic transfer from the account where your paycheck is deposited to your savings account. A simple, automated process like this enables you to save money without having to remind yourself to transfer the funds. How To Save More Money By Paying Yourself First
  • How much you should pay yourself first depends on your budget. Here’s how to estimate how much you can save:
    • Calculate the monthly amount of your net income, which is the amount you receive on payday after taxes, health insurance and other items are deducted. Subtract your fixed expenses like rent or mortgage payments, regular but variable expenses like utilities, and the average amount you spend on food, clothing, transportation, medical expenses and other costs.
    • If you end up with zero or a negative number, you need to immediately focus on reducing non-essential expenses.
    • If you end up with a positive number, that’s the amount of your discretionary income, which includes the amount you have available to save.
  • Aim for saving ten percent of the take-home amount of your paycheck. If that seems too ambitious, start with a lower amount and gradually increase it over time. If you make small adjustments, you probably won’t feel the pain of saving more money.
  • Even if your budget is stretched to its limits, you can still afford to put away a small amount of your income into your savings account on each payday — even if it’s only $20. After a few months, increase your savings to $25 per paycheck. After a year, you’ll notice that you’ve stashed away a tidy sum of cash.
  • When you get a raise at work, make sure you increase the amount of your savings. Ten percent of a bigger paycheck means you save more. In fact, when you get a raise or a bonus, it’s an opportunity to increase the percentage or amount you’ve been saving.
  • However, keep in mind that paying yourself first doesn’t mean that you can abandon your other financial obligations; the plan will backfire if you pay your other bills late or fall behind in credit card payments. Instead, paying yourself first means that you make your savings expense one of your top priorities.
• Why You Should Pay Yourself First
  • It’s important to make regular savings deposits without diverting the money for other purposes. Building a savings account is critical for a couple reasons.
  • First of all, you need an emergency fund. Unfortunately, most people will have unexpected expenses due to job loss, injury or illness, death of a partner, divorce, expensive home or car repairs, or one of the many other curveballs that life pitches at us without warning. How To Save More Money By Paying Yourself First
  • According to a March 2015 report by the Pew Charitable Trusts, nearly 60 percent of adults polled experienced some type of “financial shock” and more than half of those in that group said their setback made it harder to make ends meet. If you automate your savings, your savings account will help you pay for these unexpected expenses without making you to go into debt.
  • Second, to motivate you to stick with your saving regime, you need to have financial goals. Perhaps you want to buy a house or car. Maybe you want to save for a vacation without charging the expenses to your credit card and increasing your debt. Paying for your children’s college education or saving money for your own retirement might seem like long-range goals, but it’s never too early to start.
  • Get into the habit of paying yourself first. You’ll be proud of the amount of cash you can painlessly accumulate without doing any extra work, and have more security knowing that an unexpected expense won’t put you in the red.

Author's Verdict

Saving money can be a hard thing to do with bills, things that we want, and such. Hopefully our post on How To Save More Money By Paying Yourself First helped you find loopholes to save money. If you don't have a savings account, see our best savings account section. Looking to add a little extra income each year? If so, see our list of the best bank deals, bonuses, and promotions!