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How to Save Money Using "Pay Yourself First" Technique




By Stas Bekman.

Published: 14 July 2006

How to Save Money Using "Pay Yourself First" Technique

"Pay Yourself First" or "Never Seen, Never Missed" is about putting some money aside as soon as you get your paycheck. It's almost impossible to do that at the end of the month, as usually all available money is spent. That's why you need to put that money aside at the beginning of the month (or as soon as you've got the paycheck).

If you try that approach you are most likely in for a surprise, if you don't see that extra money and it's not available for spending you won't miss it. This is because we tend to spend as much as we have. So when we have less we spend less.

It's usually a good idea to to pay yourself at least 10% of your income as soon as you get your paycheck. Later you may want to experiment and try to raise the percentage.

The important thing is that you need to put this money out of your reach. You can invest it, or you can deposit it into a yearly term or similar. Both ways usually allow you an automatic direct deposit, so you won't even need to remember to do the actual transaction, which is a good thing, since you won't have a temptation to not do it.

Related Material

Save First, Pay Taxes Later (http://finance.yahoo.com/columnist/article/millionaire/2058)
Similar advice from David Bach

Pay Yourself First (http://www.cbsnews.com/stories/2005/01/06/earlyshow/living/money/main665127.shtml)
(CBS) The Early Show continues its series designed to help you retire rich -- even if you haven't started saving yet.

Pay Yourself First? (http://www.soho.org/Finance_Articles/Pay_Yourself_1st.htm)
When I do that it seems that I have to withdraw that money later on in the month to pay the bills. So how does this actually work?

 

Secret One: Pay Yourself First (http://www.oprah.com/tows/pastshows/200401/tows_past_20040113_b.jhtml)
From the Oprah's show Automatic Millionaire: How to Become One


 

 

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