02 Sep
2010

Many financial experts give the advice “pay yourself first” but customers tend to be confused by this bit of wisdom. You already get a paycheck – how are you supposed to pay yourself? Paying yourself means that when you budget for your month, you tabulate your savings and your investments first, and then pay bills and pay for essentials out of whatever is left.

Paying yourself first is good financial advice for a few reasons. First, if you budget for everything else first and then decide to put whatever is “left over” into a buffer account or emergency fund, you will always fund that there is hardly anything “left over.” By considering your financial goals first, on the other hand, you make those the most important, so that you wind up economizing from other, less important areas of your budget. As well, by paying yourself first you are sending yourself the message that your financial goals are most important, and you will meet other goals as well. This is important, as it ensures that you have savings instead of putting every spare penny towards personal loans or bills.