Pay Yourself First?

“Pay yourself first” is some great advice to help people save money. If you have any trouble with money, as most people do, there are a number of ways to improve your finances including paying yourself first, tracking your spending, and budgeting. Even though I think these things are important, I don’t do them myself.

The idea of paying yourself first was popularized by David Chilton in his first Wealthy Barber book. When your pay hits your bank account, the idea is to set aside some chosen percentage for savings before you begin paying the month’s bills and start spending any money on wants. Most people who wait until the end of the month to save whatever is left end up saving nothing.

However, my wife and I have saved over 50% of our take-home pay for several years now by using the dangerous save-whatever-is-left method. We don’t bother to smooth out our expenses with equal billing plans and paying monthly for insurance and other things. We don’t spread out big expenses like home repairs either. As a result, our savings rate varies wildly from month to month. But by the end of the year, our saving percentage is always high.

I see many people who desperately need to start budgeting, tracking their spending, and paying themselves first. But I don’t often come across people with high saving rates who don’t really try very hard.

It feels strange to advise people to do things I don’t do myself, but that’s exactly what I do. I would never recommend most of the details of my money habits to anyone. The end result of saving money without building debt is worthwhile, but different people need different methods to achieve this result.