Creating a Savings Plan: Pay Yourself First


Creating a Savings Plan: Pay Yourself First

You’ve probably heard the phrase “pay yourself first.” But what does it really mean? It means you should consider your savings account in the same manner you consider your monthly bills—as a necessary expense. In fact, you should pay yourself before you pay your monthly bills. Professional blogger J.D. Roth lists these three reasons why:

·         When you pay yourself first, you’re mentally establishing saving as a priority. You’re telling yourself that you are more important than the electric company or the landlord. Building savings is a powerful motivator—it’s empowering.

·         Paying yourself first encourages sound financial habits. 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—saving, bills, fun—you’re able to set the money aside before you rationalize reasons to spend it.

·         By paying yourself first, you’re building a cash buffer with real-world applications. Regular steady contributions are an excellent way to build a nest egg. You can use the money to deal with emergencies. You can use it to purchase a house. You can use it to save for retirement. Paying yourself first gives you freedom—it opens a world of opportunity.

Virginia Saves offers a variety of resources to help you get started—join today!

8 comments:

  1. i think you not just have to build the saving habits but you will need to set goals that are meaningful.

    just like we use a chocolate ice-cream to push ourselves to work till the end of the day, setting a savings target of $100k in 7 years and comfortable pay yourself first targets will ensure that you reach your goals much more successful Pay yourself first:Habits and Substantial Target

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  7. The first bill you pay each month should be to yourself. All the personal finance blogs say it, too. Even your parents have given you the same advice.

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