You've heard the term 'pay yourself first' many times, but what does it actually mean? For us, 'pay yourself first' means saving first and spending what's left over – to put money into your savings each payday, as soon as you get paid and before you’re tempted to go and spend on something else.
Paying yourself first not only helps you reach your short and long-term goals, but you may also be surprised with all the benefits you’ll begin to see, including:
- Setting saving as a priority;
- Creating positive financial habits;
- Being in control of your finances and future; and
- Improving your overall financial well-being.
By spending only what’s left over after you save, you’ll also begin to understand your needs vs. wants a bit more, and understand how your previous spending habits may have impacted your saving habits.
Determine your short and long-term goals and the amount you want to save. Prioritize these goals from most important to least important.
When starting the pay yourself first method, start small to become comfortable with saving first, and spending what’s left. As you become more comfortable with the method, increase your contribution amounts.
A great way to ensure you don’t break away from this habit is to set up automatic money transfers each payday to move money automatically over into your savings.
There are many different ways to save money and your short and long-term goals can help determine which type of account you may need.
For example, if you’re saving for retirement, you may consider putting your savings into a Registered Retirement Savings Plan or Tax-Free Savings Account. If you’re looking to build your wealth, you may consider putting into a term investment or Guaranteed Investment Certificate (GIC).
Talk to a financial advisor to help understand what savings tool may be best for you and to set up an account.
Being in control of your finances helps you be in control of your future. By paying yourself first, you’re taking a positive step in creating good financial habits and contributing to your overall financial well-being. Now it’s up to you – start paying yourself first… on your next payday!