five concrete ways to pay yourself first

November 13th, 2008

Five Concrete Ways To Pay Yourself First

We’ve all heard the phrase “Pay yourself first”, but what does it really mean?  At its essence, paying yourself first is saving money for yourself before you give it to everyone else.  I use the term “give” loosely, I am not talking about specifically charitable giving or anything like that, more anything you spend money on, be it bills, shopping, or anything else.  It is a simple concept, pay yourself first, but one that a large amount of people do not follow.  Why?  Because it is easier to spend than save?  Because it is easier to pay those who are asking for your money than give it to yourself?  because it doesn’t seem like there is enough to go around?  Whatever the reason, here are five concrete ways you can start getting into the habit of paying yourself first.

1.  Set up an automatic paycheck deduction/savings deposit.  You don’t have to start at the top to do this.  Yes, we’ve heard you are supposed to save 10% of your salary but you don’t have to start there.  Set up an automatic deduction out of your paycheck to go into your savings account (or an automatic deposit out of your checking into your savings) for just $25 a month.  Just do it.  You’ll get used to having that money automatically saved for you, and you can build it up to a bigger amount later.

2.  Put one item back at the store, and deposit the savings.  Before you leave the store when shopping, go through your cart and put one item back.  Write down how much that item would have cost, and then when you get home, do an online transfer from your checking account to your savings account for that amount.

3.  Skip your habit once, and deposit the savings.  Do you have a habit that costs you money?  Be it smoking or coffee or eating out or books or anything else, I’m not asking you to give it up for good.  Just for one day.  Refrain from your daily (or weekly) habit one time, and then deposit the savings into your savings account.

4.  Sell one item, and deposit the profits.  If you are like most people, there is at least one item in your house that is underutilized and you could sell for something.  Use craigslist or e-bay or even a note on a bulletin board and sell one item.  Just one.  And deposit the profits made into your savings account.

5.  Make a phone call, record the savings. What services do you have, and what might you be able to pay less for?  From interest rates to insurance payments to calbe TV, look at all of your services, and identify where you might not be getting the best deal.  make a phone call – and when you reduce a payment, deposit the savings.

There’s a recurring theme here, and it is for a reason.  Deposit the savings.  Don’t just save hypothetical money through actions – actively *save* that money concretely somewhere.  And don’t stop with these ideas – this is just the springboard to get your toes wet.  The more you make paying yourself first a habit, the more likely you are to do it.  And the more likely you are to do it, the more times you will follow through and pay yourself first.  Even little payments to yourself can over time add up.  Keep that big picture in mind, and make a payment to yourself today.

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30 Responses to “Five Concrete Ways To Pay Yourself First”

  1. I think I’m doing #3 right now.
    Payday is tomorrow. I have about $9 in my regular cashflow account. And I’m out of cigarettes. I had enough money to buy another pack, but I bought a (diet) pop and (chocolate) cake instead. Now I don’t have enough money to smoke today unless I put it on a credit card.
    So, I’m not smoking!
    At least for the past…72 minutes… 73 …..

  2. Excellent ideas! #1 is the only one that consistently works for us. Unfortunately, we haven’t found the self discipline to follow through more than occasionally on the others.
    It is, however, easier to -say- “save” change these days: we have some of those ATM machines which accept cash (bills) and in those rare instances I use cash and have change, I make a beeline to an ATM and deposit it. We also have a piggy bank for coins, and I think I’ll be heading to a Coinstar before Dec. to take advantage of their $10 bonus ;-)
    Anyhow thanks for the reminder that it ALL counts!

    *Cheering on the Superstar!!*

  3. These methods have already been very effective for my husband and me. Whenever we reduce our expenses in a concrete way, we immediately set up an automatic deduction from our paychecks to match it.

    One thing I did recently, that you might want to do, is calculate how much you’ve been saving on gas since the price went down, and start putting the difference away automatically. That’s $20 extra per paycheck easily.

  4. these are GREAT ideas! I’m going to start doing some of them on a regular basis. I especially like the idea of depositing savings from unnecessary items in the shopping cart! brilliant!

  5. I get paid weekly so I take 10% of each check and it is automatically taken out each Friday through ING. I don’t even count it as money I’ve received because it’s gone on the same day.

  6. I put my entire paycheck into savings and then transfer only enough to pay the immediate bills and nothing more. Sures cuts down on spending.

    I gave up soda pop entirely about 2 months ago – cold turkey. I took one look at the ‘new price’ and said, forget it! I’m buying diet pop, getting no value out of it, and will just up my tea consumption instead and be healthier for the switch.
    I mention this as now that I am NOT going to the store twice a week for pop, I find no reason to have to go to the store at all – and therefore no impulse buys while I’m in there for the pop! The first time I hit the grocery store was actually 5 weeks after I quit the pop – great savings!

    I hear there is an new alternative to ebay – no listing fees – can’t remember the name tho. Has anyone else heard it or tried it?

  7. Good ideas! I enjoyed reading this post. :) I’ll probably try #2 starting the next time I go out the grocery store. It would be a good habit to form. :)

  8. Walgreens $5 off $20 coupon up at

  9. I like that Marci.

    I set up auto debit for: savings, college fund, retirement

    Pay bills individually, the rest is for fun

  10. I’m not generally a big fan of advising people to employ tricks in order to boost savings, but I do believe that setting up an automatic transfer to a high-yield savings account (as well as to a Roth IRA) is a must. I also tell people to check the bottom of their grocery store reciepts for the total savings for that trip, and transferring the savings to ther savings account. Especially for those who use coupons, it can amount to significant contributions when many families go grocery shopping at least twice a month.

  11. @Marci,

    Kijiji? Just a guess, it’s one I just heard of recently myself. I don’t know if it has listing fees or not.

  12. For years I’ve been putting $10 per week into my RRSP (this is because I took money from it to use as a down payment and have to repay it over 15 years, or a minimum of about $480 per year). I know that I generally never even notice it, so I eventually opened an ING account and started putting $10 per week into savings too. After a while I upped it to $12 per week.

    I also used to save my bottle refunds (when I used to drink a lot of Coca-Cola) and I bought myself a Corelle dish set for 8 with the proceeds (money I would have just frittered away otherwise).

    I’ve thought about saving the savings listed at the bottom of my receipts but have never done so. Hmmm.

  13. I like your idea of depositing the savings. I’m going to talk that over with Hubby. I think we could transfer from checking to savings quite easily online. Maybe I can start transferring what I save using coupons over to savings to get a real picture of it! Wouldn’t that be fun? A big incentive to watch that chunk of change start to grow!

  14. I set up an account with ING and I am planning on depositing 10% from our paychecks soon. We generally get a 3% raise each year anyway.

    I am debating over starting to fund a 401k. Any advice?

  15. I have a set amount direct deposited from my paycheck into savings. I’ve gotten so used to it I don’t even miss it. I also took advantage of Wachovia’s Way to Save program – they deduct $1.00 every time I use my ATM card, or pay something online. I started doing this last May, I think, and so far I’ve saved close to $650. It was painless, but I had to get in the habit of deducting that money from my checkbook. I think my next move will be automatically deducting small amounts from checking to my ING Direct account and treating it as a “bill”.

  16. I think these are all great ideas. I just need to check and see if the bank charges me for transfers. I think I will start with the “put one thing back” savings plan.

  17. threadbndr (karla) Says:

    November 19th, 2008 at 10:44 am

    Sandy, if your company offers a match to any part of your 401K, you should at least put in enough to get the match – it’s ‘free’ money.

    If they match in stock, be careful – you shouldn’t have more than 10% of assets in your company stock (and that includes 401K AND ESSP AND options)

    If they don’t match, start a ROTH IRA instead if you can.

  18. I am so excited to find you! Thank you!! I agree with your counsel & recommendations. The only thing I would suggest is beginning to a 3 month food storage. In this unstable economy, food is going to go up (already has) & jobs are going to become scarce. Having a 3 month supply of basics where you just have to supplement with fresh fruits/veggies can really help if times get tough. I agree to put one thing back while at the store (the soda!) but grab an extra can of corn or peas or whatever…I hope you’ll never need to use your storage but if you need it, you’ll be glad you have it (and don’t forget to rotate it!)

  19. Another way to pay yourself first is to always use cash. I only pay for things with 20 dollar bills. When I get change, it goes to me (straight to the bank). this works out to normally be about 17.5% of my spending.


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