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Pay Your Future Self First

Saving money for a rainy day may seem impossible, especially if you’re living paycheck to paycheck. But by re-prioritizing your budget and paying your future-self first, you can develop a strong saving habit that can really “pay” off.

What Does It Mean To “Pay Yourself First”

One of the key principles of personal finance is to "pay yourself first."  Paying yourself first is a money-saving technique that focuses on saving for your long-term needs and well-being before other expenditures.

For example, paying yourself can include:

  • Putting money into your retirement accounts, such as a 401k or Roth IRA
  • Buying insurance, including life insurance and long-term disability care
  • Paying into a health savings account
  • Creating an emergency fund
  • Paying off debts
  • Saving for other future expenses or goals

Why This Works

Only after you have paid your mandatory expenses, your savings first and then your bills, will you know how much you have available for discretionary spending. The order this is done is important because it may be harder to cut out things like cable or a club membership to put $400 in your retirement account every month. But it can be easier to eliminate those discretionary expenses in order to pay your rent. By saving before you pay your bills, you put your other mandatory expenses “at risk”. This makes it more likely that you will eliminate discretionary expenses in order to grow your savings and pay your living expenses.

Budget to Save

Forming good savings habits starts with an honest look at your finances. Start by reviewing your spending to see where all of your money goes each month. Find where you can cut back and ways to make your money go further, so you can save more. Create a budget that makes saving a priority and not an afterthought. Try the 50/30/20 budgeting technique; 50% of your income goes to needs, 30% towards wants, and 20% for savings and/or debt repayment.  

How to Start Paying Yourself First

  • Automate Your Savings - Have trouble saving? Automate it by sending your paycheck to different accounts.
  • Pay Off Debt First - If you have high-interest debt, focus on paying that off first. Otherwise, the interest payments will continue to eat into your ability to save.
  • Start Small - You can start building an emergency savings account $10 at a time. As long as that $10 is going out first, before any other bills, you will start to make progress.

How Credit Union of Denver Can Help

Starting a saving journey doesn’t have to be difficult. At Credit Union of Denver, we are focused on your financial wellness, and we have the products and tools to help you save, spend, and borrow better. We offer financial coaching, educational and budgeting tools, and great rates on savings accounts. Explore our Money Markets, IRAs, and Certificate options to find what works best for you.

We hope these tips help you save smarter. By paying yourself first, you’ll be better prepared for what the future holds.


Sources & enhanced by Credit Union of Denver

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