The Best Way to Save Money? Pay Yourself First

Are you frustrated with the constant struggle of making ends meet and never feeling like you’re making progress financially? You’re not alone. A great way to break the cycle and build a more secure financial future is to pay yourself first.

This powerful financial technique prioritizes your savings and investments when creating your budget. But what exactly does it mean? Let’s dive in and discover the blueprint to start your journey to financial success!

Why Pay Yourself First?

Prioritizing your financial goals by paying yourself first means setting aside funds for savings and investment goals before paying bills and other expenses. It’s like “paying” your future self with online transfers from your checking account to your savings. By doing this, you increase your chances of meeting your financial goals, such as owning a home, upgrading your car, or taking your family on a dream vacation. 

According to Lending Club, nearly 80% of Americans live paycheck-to-paycheck. Living paycheck-to-paycheck means that you rely solely on your income from your job to cover your living expenses and bills without any savings or surplus at the end of the month. This stressful and precarious situation leaves little room for financial planning or investing in the future. 

Paying yourself first helps you avoid the paycheck-to-paycheck cycle that can prevent you from reaching your goals. 

An Example of Paying Yourself First

When prioritizing your finances, paying yourself first is a powerful way to achieve your long-term goals. For instance, imagine you and your partner have a combined household income of $55,000 yearly or about $4,500 monthly after taxes. Once you’ve paid your rent, utilities, and other bills that stay the same each month, you should set aside some money for additional expenses that fluctuate, such as gas and groceries. 

Assuming you have $1,000 left over after these expenses, you can safely set aside $500 to build up your emergency fund. The other $500 can be used to cover any unexpected costs.

Tip: Make goal saving easy and automatic with the Payactiv Visa® Card*. You can securely store up to $10,000, and with SmartSave, you’ll know exactly how much to set aside without doing any math. Plus, it’s FDIC insured for extra peace of mind.

Ways to Start Paying Yourself First

Understanding the concept of paying yourself first allows you to set specific financial goals for yourself and your family. Here are some popular financial goals to consider,

• Emergency Fund: It’s essential to keep at least three to six months of expenses in a savings account for financial emergencies like medical bills, home repairs, or an unexpected loss of income.

• Retirement: Retirement planning is crucial, and living on Social Security isn’t a good idea because the program’s future is in doubt. If you don’t have access to a 401(k) plan or similar retirement plan at work, it’s up to you to save for retirement on your own.

• Down Payment: To avoid the added expense of private mortgage insurance, many families set a goal to save at least 20% of a home’s value for a down payment.

Read: Top Goals to Start Saving for Today

The Wrap Up

Paying yourself first is a powerful financial technique that can help you achieve your long-term financial goals and increase your financial flexibility between paychecks. By prioritizing your savings and investments before your bills and expenses, you can give yourself increased financial stability. 

* The Payactiv Visa Prepaid Card is issued by Central Bank of Kansas City, Member FDIC, pursuant to a license from Visa U.S.A. Inc. Certain fees, terms, and conditions are associated with the approval, maintenance, and use of the Card. You should consult your Cardholder Agreement and the Fee Schedule at payactiv.com/card411. If you have questions regarding the Card or such fees, terms, and conditions, you can contact us toll free at 1 (877) 747-5862, 24 hours a day, 7 days a week.

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