personal finance

pay yourself first

A savings strategy where you automatically transfer income to savings before paying any other expenses.

Example

“By paying himself first he saved $200 a month without ever missing it.”

Memory Tip

FIRST — savings before anything else. Like a bill you pay yourself.

Why It Matters

This term matters because it helps people prioritize savings and build wealth consistently rather than hoping to save whatever is left after spending. By making savings automatic and mandatory, individuals are more likely to reach their financial goals and develop a habit of building emergency funds and long-term investments.

Common Misconception

Many people mistakenly believe that paying yourself first means you will not have enough money for essential bills and expenses. In reality, the strategy involves setting aside a reasonable percentage of income that still allows you to cover all necessary costs while building financial security.

In Practice

If someone earns 3000 dollars per month and decides to pay themselves first by automatically transferring 300 dollars to savings before paying rent, utilities, and other bills, they ensure 300 dollars goes to their future every month. After one year, this person will have accumulated 3600 dollars in savings without having to consciously decide to save after all other expenses are paid.

Etymology

Popularised by George Clason in The Richest Man in Babylon.

Common Misspellings

pay-yourself-firstpay urself first

Related Terms

budget

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