Paying yourself first is probably the oldest rule in the book.  The idea is simple.  When income lands in your current account, before you do anything else, put some away in regular investments and savings.

And first means first: before your housing, food or other costs.

Your wealth is the most important thing

Clearly your rent or mortgage is an essential bill to pay, but the idea here is to set up your finances so there is room for regular saving.  You’re deciding that your long-term wealth is more important than the next bill.

The amount you decide to pay yourself is less important than starting the habit.  Better to start now, even with 1% of your income, and raise it later, than do nothing at all.

Don’t even think about it

The second benefit is obvious: by making regular investments, you stand a better chance of building up real wealth over time – especially if you’re putting your money into assets that have a chance to grow.

By setting up monthly contributions, it happens without you thinking about it, and the temptation to put off saving until another day is gone.  In fact, the less you see of the money before it is moved to your savings, the better.

Fill your boots

Once you’ve established a regular ‘payday’, it’s time to think about where to distribute it.  Most people want to fill at least three pots: an emergency fund, a retirement fund, and a longer-term investment fund.

Make sure each pot is invested in the right place for the kind of access, returns, and tax shelters you’ll want.

And although paying yourself should be automatic, managing those savings deserves attention.  Is your money going to the right place, and is the right amount going in? For example, a raise at work is the ideal time to hike the amount you pay yourself first.


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