Pay Yourself First To Save Money And Enjoy Life

One of the best strategies I’ve heard as method to save money is to pay yourself first. With this approach, you address your savings goals as the first item in your budget, rather than the last.  The principle is that if you address savings as a goal on the bottom of your list (meaning you ‘pay yourself last’), you’ll always find other things to spend the money on and you’ll miss the opportunity to meet or stretch your savings goals.

The money approach.  Say your goal is to save 10% toward retirement.  If you use the ‘pay yourself last’ approach, you’ll address most or all of your budget items before you get to savings.  More often than not, you’ll have less than your stated goal available when you get to the end (and if you still do, then it’s probably time to increase your goals!)  Many times, there won’t be anything left at all, which is how so many people go years and years without saving a single dime for retirement.

By paying yourself first, you put that goal first and foremost at the top of the list. You list the 10% as your top item and work down from there.  The idea is that, by doing this, you will likely find ways to cut spending in other areas so that you can satisfy your savings goal.  It forces you to work a little harder, where the ‘pay yourself last’ approach makes shrugging your shoulders and thinking you can worry about it next year a perfectly acceptable option.

Even though it isn’t.  Not by a long shot.

In some cases, you may truly have such a tight budget that you have to readjust your ‘number one’ goal.  You certainly don’t want to put yourself in a position to lose your house or miss paying a bill.  At that point, the benefits you’d get from that savings goal would be very negatively offset.  But, in many cases, it allows you opportunities to question whether you really are that tight in your budget.  Can you cut a premium cable channel?  Can you eliminate your home phone line and do everything via cell?  Can you limit yourself to one drink at the bar instead of three when you go out? Paying yourself first will put you in a more forced position to ask questions like these, and more importantly, to answer them and apply those answers to your budget.

This is a valuable approach to reaching your savings goals, so why not apply it to other areas where resources are spread thin?  Namely, why not apply it to the one resource that we all have which we’re all faced with the same constraint?

Of course, I’m talking about time.

We all have 24 hours in a day, and only 7 days in a week.  No amount of money or sorcery can buy you anything extra.  How many of us feel ourselves getting stretched thin?

I know I just raised my hand and I’m guessing you either just did or mentally thought about it.

Now, I’m not going to spend the remainder of this article talking about how you can find more time to get things done or to be more productive in your work day.  Nah.  I’m going to talk about how you can apply this principle to give yourself more time which you can enjoy.  That’s a lot more fun to do and it’s a lot more fun to write about.

And, let’s face it, I think many of us could use a little bit more enjoyment out of life.

So, how do you get this extra time?  Simple.  By using the same ‘pay yourself first’ approach which we went over above, you can give yourself time to enjoy life.  I’m sure many of us work, come home, do chores around the house, work on this or that, and if there’s any time left in the day, we might kick back for a few minutes, and that’s our enjoyment time.

How fun is that?  Not very.

It’s important.  The fact is that we need to enjoy ourselves.  The human body and human mind need to experience pleasure on a regular basis.  Otherwise, we get depressed.  It causes us to make poor decisions about what we eat.  We don’t exercise.  Our health can suffer.

So, yes, enjoying yourself is essential for your health.

Therefore, it’s extremely important to ‘pay yourself first’

Time ticks away.  Not only is it important for your health, it’s important to enjoy yourself so that you are getting the most out of your life.  I’ve heard it said many times that, when on their deathbed, people will often wish they spent more time with family, with friends, with their young kids.  Nobody ever says that they wished they had spent more time in the office or cleaning out the basement.

If you have young kids, you need to spend time with them because they will only be this young once.  I look at our kids and they seem to grow every day.  Every once in a while I will just put aside what I’m doing and spend some time playing a game with them or reading books to them.  Even if I have a list of twenty things to do, in ten years nothing on that list or any similar list will be important enough to remember, but there’s a good chance I’ll remember the bond that I built with my kids during these times with them.

Later is there.  Besides, when my kids grow up and move away someday, the list of things that I’ll have to do?  That will still be there even though my kids won’t.  So, while crossing things off a list can make you feel accomplished, it doesn’t matter as much in the long run.

Understand balance.  One of the things that’s important to remember and figure out is how to balance this.  In no way am I advocating skirting all of your responsibilities and living every moment for the moment.  If you go overboard like that, chances are you’ll lose your job or things will start to look so bad around your house and yard that life will become unbearable in new ways.  This is not what I’m suggesting at all.

The key is to find a balance. The financial example I used above had 10% as a target number for retirement savings.  Set a similar percentage of time where you enjoy yourself first.  If you get home at 5:30 and you go to bed at 11:30, that’s six hours.  Dinner and such likely has an obligation there, but if you find the rest filled up with ‘things to do’, set a goal of 15 minutes a day or, maybe a half hour two or three times per week, to do something enjoyable.  Spend time with your family.  Catch a favorite TV show.  Go outside and do something you enjoy.  Exercise.

Making up the difference.  One of the concerns she has is that if you take that time away from ‘getting things done’, you’ll end up leaving things undone or incomplete.  This can cause a certain amount of stress that could negate the good that comes out of your newly taken enjoyment time.  If you get stressed out, chances are you’re just going to drop your time to enjoy life.  So, what do you do instead?

  • Prioritize – Out of all the things you do on a regular basis that take your time, chances are some of the tasks could be eliminated.  If you’re not getting value from something you’re doing regularly, reduce the frequency or eliminate it altogether.
  • Set time limits – One blogger I follow addresses this issue by carrying around a timer for certain tasks.  This causes her to ‘work’ faster and limits her time on some tasks that could otherwise consume massive amounts of time if left open ended.
  • Outsource – If you have a ton of things that have to get done, sometimes paying someone to do one or two of them is a worthwhile approach, especially if it frees up some time for you to enjoy life.  You have to look at the opportunity cost and available money to pay someone, but now and then adding an extra expense can be worth it, so long as you have the money to do so.

I guess this post is about as close as I can get to tying back to the old adage of ‘Time is money’ because for most of us, they are both limited resources that we must make work effectively, and in both, we must find ways to achieve balance.  So, in the end the ‘pay yourself first’ approach is a pretty natural fit if you think about it.

Do you use the ‘pay yourself first’ approach in how you handle money or time?  Do you think there are areas where this would make sense?  Readers, I’d love to hear your stories and thoughts.

19 thoughts on “Pay Yourself First To Save Money And Enjoy Life”

  1. I use it in terms of money and fail too often to do it in terms of time. Being analytical it’s so easy to include it in the budget but my intentions fail too often with our children and enjoying time with them. There’s a balance to be had and one I am currently looking for.

    • As soon as you find the right balance, something knocks it out of whack and you start all over. That’s the case in just about anything.

  2. I make it automatic! I set up a payroll deduction for (403B, IRA & Roth IRA) savings and live on what is left. The irony is I build up savings in addition to my payroll deduction. I am constantly checking my expenses to see if I can lower an expense. It takes literally seconds.

  3. Oh, goodness, I loved this post — you are so, so right! Paying myself first is my new mantra.

  4. When I started reading about personal finance, I remember learning about paying yourself first and how I thought it was crazy I never even considered thinking that way before. I definitely do that now and it’s a great way to think about your finances.

  5. That is a big thing I want to accomplish next year with taking more time for things I value and enjoy. I get up really early to exercise, so that’s kind of my time, but I want to be able to do more through the week with my daughter while she’s young.

  6. We use the pay yourself first system with my wife’s 401k. In that respect it’s worked out very well. We don’t see the money and therefore we use it in our budget calculations. My main concern is if I were to automatically deposit money via automatic deposits from my checking account. In those cases you still need to record the transactions. If you forget to record an automatic transaction you can end up overdrawing the account.

    • I guess that’s true but it’s still going to show up in your transaction log which I use as the basis for entering data into my spreadsheet.

  7. Absolutely, pay ourselves first. Actually, first avoid debt, and then focus on paying ourselves first. If we can get into the HABIT of saving money for the old version of ourselves – who will NEED the money – it will be just that much easier. Save it, pretend it never existed, and live off the rest.

  8. For me the money part is super easy and have been doing that for years it’s the time part I lag on. I need to find more time to do everything I want to do but i do balance it the best I can. I think if we had to throw a child into the picture I’d really need to sort through it all. Great post, lots of meaning. Mr.CBB

  9. I use ‘pay yourself first’ approach to handle money. Even I did not use same approach for handle time. Pay yourself first work in most cases however it is not easy if you have to pay for others as well.

  10. I am diligent about increasing 401(k) contribution percentages with every raise, but other than that, I am not so good at paying myself first. Next raise, I think we need to send some of it straight to savings (like a payroll deduction we never see) so our savings account gets a bit more padded in 2013.

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