We all know that we ought to be paying ourselves first — by building a healthy emergency fund, investing in our retirement accounts, and saving for important future purchases.
But for many of us, it can feel like paying ourselves first will end up shortchanging our other financial obligations. How can you pay yourself first when you barely have enough money to make it to the end of each month?
But saving is just like Lao Tzu’s journey of a thousand miles. They both start with a single (and, in this case, easy) step.
Here are five ways you can painlessly start paying yourself first:
1. Automatically Transfer 1%
The best way to save money is to keep it out of your hot little hands in the first place. You can do that by automatically transferring funds to your savings or retirement account every time you get paid. That way, you never have the temptation to spend it.
Start by setting up an automatic transfer of 1% of each paycheck. While it may seem as though 1% is hardly enough to be worth it, it’s still more than you’d be saving otherwise. Once you get used to having your take-home pay reduced by such a small amount, you can easily increase your savings by another 1% — or more. Losing 1% is painless, and it will add up over time.
2. Save Your Change
This one’s an oldie but a goodie. Keep a jar in your house for pocket change, and deposit all the coins into your savings account once the jar is full.
You won’t feel any difference in your finances, and you’ll be adding money to your savings. You’ll get an extra boost if you label the jar with your savings goal, making your coin jar feel that much more important.
3. Reduce Your ATM Fees
If you regularly hit up the ATM for cash, you certainly know that ATM fees can add up. An easy way to save money is to halve the number of times you go to the ATM.
For instance, if you’re in the habit of withdrawing cash twice a week, switch to a once-a-week, double-size withdrawal instead, saving yourself the second ATM fee. While you’re at the ATM making your withdrawal, take a moment to transfer the amount of the (second) ATM fee into your savings account. Voila! You’ve spent the same amount of money you usually do, but you’re paying yourself instead of the bank.
4. Keep Paying Paid-Off Loans
Sending off the last payment on a loan is certainly a reason for celebration. But it’s no reason to stop making the “payment.”
Instead, since you’re already used to living without the amount of the payment, just redirect it toward your savings or retirement account. Then you’ll get the benefit of an extra savings cushion without feeling deprived.
5. Deposit Your Windfalls
Suddenly coming into unexpected money — whether it’s a large tax return you weren’t anticipating, or finding a twenty-dollar-bill in an old coat pocket — is one of the nicest feelings in the world. Rather than simply spending your windfall, put it into your savings account. It’s money you weren’t counting on or expecting, so you won’t miss it.
(One caveat, however: I personally think it’s a good idea to take a small portion of a windfall to treat yourself, before putting the rest of it away. That way, you don’t feel deprived of that wonderful sensation of finding “free” money.)
The Bottom Line
No matter how tight the budget, there’s always a way to pay yourself first. It’s just a matter of finding a little money here and there that you won’t miss.
Have you tried any of these methods for paying yourself first? Have they worked for you?