The one habit that changes everything

Pay yourself first.

Before you spend a dollar on wants, move money into savings or investments. Treat your future self like a bill that has to be paid every paycheck, automatically.

What pay yourself first actually means

Most people pay rent, food, and wants first, then save whatever is left over. The problem is that there is almost never anything left over. Paying yourself first flips the order. The moment money hits your account, a set amount goes straight into a savings account, a U.S. Savings Bond, a Certificate of Deposit, or a stock index fund before anything else.

It works because it removes the choice. You cannot spend money you never see. Your spending plan then runs on what is left, and your needs and wants get sorted out with that smaller amount.

Why it works

  • • It uses your cash flow on purpose. Money flows in and out every month. Paying yourself first puts a chunk of it into a savings account before it can drift toward wants.
  • • It earns interest for you. A savings account, a Certificate of Deposit, or a U.S. Savings Bond pays interest on the money you deposit. Stocks can also pay a dividend on top of growth.
  • • It builds a cushion for needs. When you have savings, real needs like food, shelter, and insurance are covered even if a paycheck is late.
  • • It survives bull markets and bear markets. Whether prices are rising or falling, an automatic deposit keeps going. You do not have to time anything.

A simple way to start

  1. Open a savings account separate from your debit account.
  2. Pick a percentage of every paycheck. Even 10% is enough to start.
  3. Set up an automatic transfer the day after payday.
  4. Build the rest of your spending plan on what is left.
  5. When the savings account holds 3 to 6 months of expenses, start moving extra money into stocks, bonds, or a stock index fund.

SMART goals

Turn save more into a real plan

A SMART goal makes paying yourself first concrete. Each letter forces a piece of the plan.

S

Specific

I want to save $1,000 for an emergency fund.

M

Measurable

I will check my savings balance each month to make sure I am on track.

A

Achievable

I will set aside $100 every month into a savings account.

R

Relevant

An emergency fund is important so I have financial stability.

T

Time bound

I will save $1,000 in 10 months.

Short, intermediate, and long term goals

Short term (0 to 1 year)

  • • Save $500 for a vacation.
  • • Pay off a credit account balance in 6 months.

Intermediate term (1 to 5 years)

  • • Save for a down payment on a house.
  • • Pay off student loans in 3 years.

Long term (5+ years)

  • • Save for retirement.
  • • Build a college fund for a child.

Where you put the money matters

Risks of different investments

Once your savings account is healthy, you can grow money in other places. Each one carries its own risk.

Stocks
High volatility and speculative. Prices swing with company performance and market mood.
Bonds
Default risk and lower returns, but more stable than stocks.
Real Estate
Property values move around and it can be hard to sell quickly.
Mutual Funds and ETFs
Spreading money across many things lowers risk, but they still follow the market.
Commodities like gold and oil
Prices jump around with world events and natural disasters.
Cryptocurrency
Extremely volatile with regulatory uncertainty.

See it in action

Three students, three different choices, ten years later.

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