When you build a budget, saving is often treated as whatever is left over after bills, groceries and everyday expenses. A "pay yourself first” budget takes the opposite approach.
By setting aside money for your financial goals before anything else, you can make saving a consistent priority instead of an afterthought.
Whether you’re planning for retirement, a wedding, debt payoff or another milestone, this budgeting method can help you stay focused on what matters most.
What Does Pay Yourself First Mean?
Pay yourself first involves setting aside a portion of your income for long-term financial goals before paying for other expenses each month. This approach helps ensure you do not shortchange important savings goals or risk running out of money after covering other expenses.
How The Budget Works
Start by deciding what you’re “paying yourself” for. For example, you may want to eliminate debt. Whatever goal you choose, start by setting aside money for it each month before funding anything else.
This approach can be especially helpful if you’re focused on paying down debt because it turns this into a monthly priority. As a debt reduction strategy, it can work for people at any income level because you may see results quickly, which can help you stay motivated to reach your financial objectives.
To implement your plan, calculate how much you earn each month after taxes. Then decide how much to save each month. After that, use the rest of your take-home pay to cover your other expenses.
Pros and Cons of the Pay Yourself First Budget
The advantages of this budgeting system include:
Reaching your financial milestones faster.
Prioritizing savings from the start.
Being more mindful of your spending and expenses.
The disadvantages of this budgeting system include:
Having less flexibility for unexpected expenses.
Setting aside too much for savings and not enough for other monthly expenses.
Tips for Pay Yourself First Budgeting
Use these tips to stay on track and avoid budget burnout:
Review your savings goals regularly. Revisit your savings goals every few months to ensure this approach works for you. Some people experiment with several budgeting systems before finding a method they love.
Communicate with your partner. If you share finances with a spouse or partner, discuss your savings goals and budgeting approach together.
Automate your savings. Take advantage of digital banking tools to set up recurring transfers so a portion of your income moves to savings before you have a chance to spend i
Adjust as life changes. Major life events, income changes or unexpected expenses may require you to revisit your savings goals and budget.
Who Does the Pay Yourself First Budget Best For?
This method works best for people with clear savings goals who want a simple, low-maintenance way to manage their money.
To make the process even easier, use our digital banking to automate your savings. As a member, you can also earn rewards with select Visa cards when you shop, helping you put even more money toward the things that matter most to you.
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