The WHY of Paying Yourself First

The concept of "paying yourself first" is one of the pillars of personal finance and considered the golden rule by many financial planners and advisors. By starting with a small amount each payday and perhaps by using automatic payroll deductions, after a few months, you probably won't even notice the withdrawal. You might even find you can increase the amount. 

If you’re fairly starting your road for the coveted “Financial Freedom”, saving seems nearly impossible. Of course, you have bills, obligations and wants list to begin with. Hence, you decide to pay everything and spend; then, save whatever is left. Problem is; nothing gets left behind more often than not.

But if we won’t develop the saving habit now, and there are always going to be reasons to delay. 

Seriously, “WHY” you should you pay yourself first?

Here are a few thoughts to consider why you ought to pay yourself first:

1. When you pay yourself first, you’re mentally establishing saving as a priority.

You’re telling yourself that you are more important than the phone/internet company or the landlord. Building savings is a powerful motivator. It is empowering.

2. Paying yourself first encourages sound financial habits.

Again, most people spend their money in the following order: bills, fun, saving. Unsurprisingly, there’s usually little left over to put in the bank. But if you bump saving to the front and go: saving, bills, fun; you’re able to set the money aside before you rationalize reasons to spend it.

3. You are able to take care of people you love.

Consequentially, if you have not acquired any savings and something happens to you or your income; say you got into an accident and is now unable to perform your normal work. Or worst, you die. Where will your loved ones get money to continue the kind of life you are able to provide them. Likewise, you won’t be able to extend much help to them even if you are all well, if you don’t have any savings.

4. It allows you to build a huge savings balance.

Regular steady contributions are an excellent way to build a large nest egg. You want to get into the habit of seeing money grow in an account. It is truly very rewarding to see your money grow in an account to purchase a home or save for retirement. It is also an excellent way to pay for planned larger purchases. You're almost guaranteed to make sure that money is there when you need it. There's no scrambling at the last minute.

5. It gives you peace of mind.

Your savings are there to make you sleep better at night. Your savings will always be there for you. It’s there to help you when things get tough and you encounter emergencies. Emergencies will always come and rear their ugly heads at you. It may be a medical illness, an unpleasant accident or an unexpected event that may mean the difference between life and death for you. Like if you suddenly lose your job-your only source of income - you can temporarily touch your emergency fund to help you pay for your priority expenses while you're looking for that new job.

And some final notes on this “pay yourself first.”

Besides, you have worked for your money – you should be able to keep some for yourself. As your money increases, so does your confidence. Paying yourself first is one of the best ways to start making financial progress.  It teaches your financial discipline. It is the start your own investment fund.