Pay Yourself First

One of the first steps to saving is to get yourself on an automatic pay plan. You’re going to learn to pay yourself first. It doesn’t matter if it’s only a minimal amount. What does matter is that you are going to pay yourself first. This concept is found in the book, The Richest Man In Babylon by George S. Classon. Consider yourself the first bill you have to pay.

Here’s how you can apply this to your life:

First, one of the easiest things you can do is take a portion of your paycheck and stick it right in the bank, right away, the day you get paid. One of the best ways I know of to accomplish this is through the genius of direct deposit. If your employer allows it, have your paycheck directly deposited into your bank account each and every payday. Some employers even allow a net direct deposit and a fixed direct deposit. Net direct deposit involves the majority of your paycheck going into your checking or savings account. Fixed direct deposit entails a small portion of the same paycheck going into a different account. You can make this any amount you wish, but for now, I recommend you start small. You can always add more at another time.

The beauty of this system is that you automatically put money into a separate savings account, and you never have to worry about spending it, cashing a paycheck and physically putting the money into the account, or trying to remember to save the money in the first place. After a few months, you may even forget about it until you receive your bank statement and see a nice sum of money already growing – and you’re still living comfortably on what’s left!

Another thing you can do if you get paid by paper check is to set up a savings account with an automatic bill payment service. That way, when you cash your check and deposit it into your account, each month on a specific date a certain sum of money will be withdrawn from your checking account, into your savings account to pay the bills. This is the same as paying your bills online or having your bills automatically taken out of your account. Treat your new savings account like you would a bill. Never miss a payment.


There are two ways that you can save. The first is to participate in your employer’s 401(k), 403(b), 457, SEP, SIMPLE, or profit sharing plan. The same concept applies where you’ll dedicate a percentage or fixed amount to be saved from your paycheck every pay period. You now get the benefit of saving money, and the tax benefit of being taxed at a lower rate, since employer sponsored plans take money out on a pre-tax basis, meaning you’re taxed on the sum left over after you’ve already saved.

The second is after you get paid via direct deposit, have your bank wire the money to your IRA or transfer an amount to another savings account. That way it’s already done for you, and you needn’t write a check.

I recommend starting out by saving 10% of your income. If that’s a stretch for you, start saving 5% or even 1%. The main point is to start – now! You’ll be amazed at how quickly it grows, and how easy it becomes to save even more. A funny thing happens when your money grows: it attracts more money. You’ll become motivated to save greater and greater amounts. You’ll be excited when you look at your account and it may even put you in a good mood.

Of course money doesn’t buy happiness, but can you remember how you felt the last time you found a $5 bill or a $10 dollar bill? Heck, even a buck! Felt pretty good, didn’t it? The same will happen when you forget about what you’re saving and then suddenly you’ll open up your statement and be delighted at the tidy sum nestled away.

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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