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Staff Writer at Debt Reduction Services

Understand the need to pay yourself first instead of saving what is left over.

Learning to Pay Yourself First

“No big deal. It’s just a buck!”
“$5 is not going to break bank!”

However expressed, there is a sentiment, common to many an American consumer, that spending a few dollars here or there – without thought to how it fits into their spending plan – cannot possibly contribute to any financial troubles.

For the 40% of American adults who have put together a spending plan (aka, budget) and who look at it regularly, and for the 40% of American adults (likely the same 40% as above) who save money regularly, this sentiment is probably true. Unfortunately, for the 60% of Americans living at best paycheck-to-paycheck (no savings at all) and not living by a budget, this sentiment can lead to financial pains that can last years or more.

The wisdom of millennia can be applicable in our finances: if we manage well the small purchases in our lives, we will be more likely to manage well the larger financial issues in our lives. After all, a $4.50 daily mocha really does equal $22.50 a work week, or $97.50 on average per month, or $1,170 a year! That’s equal to a round-trip ticket to Europe, to two 7-night Caribbean cruises, or to a new refrigerator or big screen television.

For those with a spending plan and who have their spending priorities in place (and, likely, a growing savings account), such a hefty sum for coffee may not even need to be justified. However, for those living paycheck-to-paycheck (or worse), contributing nothing to emergency or goal savings accounts, such an expense tends to be a great big, bright, flashing neon sign above their heads proclaiming to their fellow sixty percenters they have not set their financial house in order.

If I were not contributing regularly to a savings account, it would be important for me to understand that each dollar I spend on discretionary purchases (generally known as “wants”) is a dollar that I am NOT saving for a future time when I may NEED that dollar.

The reality of being human in a capitalist (and materialistic) society is that, without a plan and without established priorities, we spend every dollar available to us. What this means is that households that have no budget spend their entire paycheck every month. They will often justify their lack of savings by saying that they have no money to save left over at the end of the month. Put more correctly, they have no money left over after paying their bills (whether or not those bills are needs or wants). This is true, but only because they have deprioritized their savings and placed it at the end of the month. It seems counterintuitive, but households that save first find that they adjust their spending to what is left over after contributing to savings.

If this seems like a leap of faith to you, it really is, especially if you have been living paycheck-to-paycheck. The number one rule of financial success is, and always will be, “pay yourself first.”
Regardless of your income level, if you have a regular paycheck, pay yourself first. Whether it’s $1 or $1,000, pay yourself first.

If you don’t pay yourself first, you will very likely end up regretting it at last.


Todd Christensen, Author of Everyday Money for Everyday PeopleTodd Christensen


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