Pay yourself first The simple concept to start saving money

Pay yourself first The simple concept to abflug saving moneyPay yourself first The simple concept to start saving moneyHave you ever wondered why at the end of the month you have very little money saved?Or maybe you were going to put money away in your savings at the end of the month, but then wonder why there is little to elendhing to put away.Both of these situations are pretty common, but there is a simple method to breaking this frustrating savings issuepay yourself first.These three words combined create a savings method that everyone should use, but its also overlooked or forgotten.40% of people in the U.S.dont have $400 set aside for an emergency,accordingto the Federal Reserve.Follow Ladders on FlipboardFollow Ladders magazines on Flipboard covering Happiness, Productivity, Job Satisfaction, Neuroscience, and moreThe basics of pay yourself firstPay yourself first is the go-to strategy in the personal finance world and this phrase means automatically saving money from each pay check first, before doing anything else.The money can go to your savings accounts and investment accounts like a 401k or IRA.Yes, paying yourself first means the money you make goes to you first.Before any expenses or other purchases you may want to make.Sometimes, the pay yourself first strategy may be called reverse budgeting.This is because instead of prioritizing your money around bills and debt, its based on your retirement and savings goals.What are the advantages of paying yourself first?Saving money can beTOUGH. I found it quite challenging a few years ago, so I totally relate with the statistic back near the intro.Between all the expenses (utilities, rent/mortgage, debt, student loans, etc.)there never seems to be enough left to save.But thats why the pay yourself first method is critical.Most people (myself included a few years back) try to save money last of whatever might be leftover, instead of a set amount first.When you switch to the pay yourself first strategy, you h ave a much better chance to reach your particular savings goals and stick to it when you see progress.But, here are a few advantages to the is process.Teaches you how to prioritize your savingsPracticing pay yourself first, helps you change your mindset when it comes to money.It begins to establish good financial habits, that hopefully ingrains in your mind .You start thinking about money different and teaches you how to really be successful in your personal finances.Better prepares for your life happens fundsIve been calling emergency funds lately, life happens funds because leid everything is an emergency, but there are expenses as life shifts.But, when you pay yourself first, you establish a fund of money for the unexpected moments.You no longer feel stressed, worried, or need to go into debt to pay something.Establishing a good investing schedule for retirementInvesting for retirement is also something that can get overlooked or mistreated.Yet, for your financial future to be in a great place, paying yourself first is another advantage.By automatically contributing to your 401k or IRA, you are in a better financial position when you are ready to retire.It keeps you constantly contributing, no matter where the market stands.This helps you stay consistent and enkoranvers you getcompounding interestto work for your advantage.Helps you view finances differentlyWhen you start building your savings and you see this method working, it revitalizes your entire view on finances.I find it gives you more financial confidence in that you are in control of money, instead of money controlling you.This can be a huge motivator and no longer will you be lumped into some of those dismal statistics about money.How to start paying yourself firstYou are probably thinking, Well duh, just starting paying yourself firstIts in the phraseBut as simple as that might be, there are a few tips and steps to ensure you are successful.Know what your expenses areLike any part of good person al finance management, you should understand your monthly expenses.This lets you see how much per month you actually have to save before you get started blindly.This can help you see where you might be able to cut expenses to save more and the exact amount left you can divvy up in your pay yourself first plan.Create automatic transfers from checking to savingsI personally do not do this anymore because its become so natural for me to save, but I was automating when I first started.Many banks allow you to schedule recurring transfers in some way between checking and savings.Then you can choose the specific amount you want sent automatically to your savings account(s).Note I highly recommend keeping your savings account at a different bank than your checking account if you think you will be extremely tempted.Id recommend anonline bank like CIT, which provides over 2% interest and isFDICinsured.Participate in companys 401k planGet started with your companys 401k if they have one and yo u are eligible to participate.Money is automatically taken out and added to your 401k for you before you get your check, plus many companies offer the company match to a certain percent.And lastly, there are tax benefits as well.Thats paying yourself first and then someHave a side hustle?Send it all to savingsIf you have a side hustle that makes money or even just another job, try to bank most of it if you can.I realize you might be using this money to get ahead on bills and any debt, but if you are in a decent spot send this one directly to thathigh-yield savings account.If your side hustle is a business, then make sure to separate this income from your personal bank accounts.Saves you tax -time nightmares and hasslesBut I like to think of my side hustle income as almost non-existent right now.I never touch or use it, other than saving in my business bank accounts and paying any business associated costs.Related There are tons of side hustle ideas, but which ones can really produce a full-time income?Well explore this and morein this article.Saving money with debt is still importantThere is different advice about saving money when having debt.I agree that you should be paying debt and extra towards it if your interest is quite high (like credit card debt for example).But I also think its still important to save money as well.I actually wrote about thesaving money vs.paying debt conundrumI faced a bit more in-depth.Im not going to tell you what the right decision is for you specifically, but I think its important to do both, not one or the other.Final thoughtsIt took me almost four full years of my professional working career to figure out the pay yourself first concept.Its such a simple methodology to personal finances, but is so often overlooked.The earlier you establish this strategy with your money, the better financial life youll have.But, the important part isgetting started now, is better than never.As you started reading more financial blogs or books, youll probably come across the paying yourself first philosophy quite often.I personally first read about it inRich Dad, Poor Dadand it has been a financial game changer for me over the last few years and can be for you as well.This article originally appeared on Invested Wallet.