Definition of Pay Yourself First
What does the expression “pay yourself first” mean in the world of personal finance? What does pay yourself first mean?
In the world of personal finance, “pay yourself first” refers to the idea that you should always put some of your income aside for savings before paying anybody else.
Let’s say that you decide to save 10% of your paycheck every month. This would mean that as soon as you deposit your check, 10% of your after-tax earnings would go directly into your savings account. This would take place before you pay your mortgage, rent, heating bill, car payment, etc.
The idea behind “paying yourself first” is that you are setting aside money for your savings before it can disappear. Money has a funny way of slowly disappearing if you don’t immediately set it aside. We tend to subconsciously spend up to our incomes, so paying yourself first becomes a necessity for people who don’t want to spend all of their money every month and not save anything.
Most people will have an automatic savings plan where a pre-determined amount of money will be withdrawn every month into some sort of a savings plan.
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