When budgeting, the focus tends to be on paying bills and buying necessities. If there’s money left over, a portion may go to savings. This approach to saving can make long-term financial goals feel out of reach, like it’s almost impossible.
What if there was a way to make your savings grow faster while still covering monthly expenses? That’s where the strategy of “Paying Yourself First” comes in.
What does it mean to pay yourself first?
Paying yourself first is a simple, yet effective way to prioritize your savings. Whether it’s putting money towards a goal or building an emergency fund, you’re contributing to your future self’s financial success.
How does it work?
Paying yourself first involves determining how much money you want to put into savings before spending.
The best way to set a savings goal is by subtracting your monthly expenses from your total monthly earnings to determine how much you have left over. Based on that number, select an amount you’re comfortable saving each month. For example, if you have $200 left over, you might decide to commit to saving $100 each month.
Start off with an amount you’re comfortable with. Even small amounts will add up over time. Just remember to be consistent.
Why is it beneficial?
When you put money in your savings account instead of your checking account, you know that it isn’t available for you to spend. This makes it easier to save for long-term goals. It also gives you peace of mind. In the event of emergencies, you can tap into savings instead of having to stress about coming up with the funds to pay for expenses.
Lastly, you’re teaching yourself to be disciplined with your money. While not having access to those funds may initially cause some difficulty, setting those funds aside will become a habit with time. You may even consider increasing the amount you save as you’re able to in order to continue to see your savings balance increase.
How do I get started?
It can be hard to remember to transfer your money to savings. Setting up automatic transfers helps ensure it doesn’t get forgotten. Use A+ Online Banking or A+ Mobile App to easily set this up. Another way to establish automated savings is through direct deposit with your employer. Simply have a portion of your deposit go to savings. For help setting up direct deposits, click here.
Like any new habit, it can take some time to get used to the changes you’ve made. Keep at it. Paying yourself first is one of the simplest ways to grow your savings and is a habit that your future self will thank you for.